Right now, the medical cannabis space is one of the very few markets that has vast opportunities to grow, owing to the numerous health benefits it provides. Global research has shown that medical cannabis can help with chronic pain, various neurological disorders (including anxiety and post-traumatic stress disorder, or PTSD), and Crohn's disease, among many others.

Medical cannabis also proves to be an alternate option for many wanting to shift from conventional medicines. Florida-based Trulieve Cannabis (OTC:TCNN.F) has seen the true potential of this market and has established strong footing in its home state.

Doctor holding medical cannabis pill and bud

Image source: Getty Images.

A dominant player in its home state

When it comes to cannabis in Florida, Trulieve is the company that comes to mind. There are, of course, other players in the state, but Trulieve has captured a good chunk of the retail space with 51 dispensaries. (The company now operates a total of 53 dispensaries in the U.S., with the other two in California and Connecticut.)

Florida legalized medical cannabis in 2016, and since then the market has been outstanding for medical marijuana. This year, despite the lockdown, cannabis demand has seen an all-time high, hinting at the popularity of the product. The COVID-19 pandemic and the sudden lockdown also increased anxiety and various other mental health issues that cannabis is known to help.

Florida medical cannabis sales surged during the pandemic, with 36,400 ounces of cannabis flower sold during the seven days beginning March 13. That's an increase of 38% over the previous week, and much higher than the average of 22,800 ounces of smokable flower sold per week in the first 10 weeks of 2020.

The company saw dazzling revenue growth of 116% year over year to $96.1 million in the first quarter. It also improved revenue; from fiscal 2019 fourth-quarter revenue of $79.7 million, Trulieve reported positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $49.4 million. That's a jump of 161% from the year-ago period. Adjusted EBITDA also saw an increase of 10% sequentially. Interestingly, Trulieve has managed to earn this chunk of revenue and profits mostly through business in a single state; imagine the growth if it spread its roots to other states.

The company said COVID-19 didn't have much of an impact on its operations -- an especially positive sign compared with its peer MedMen, which is suffering from a cash crunch this year. In its first quarter, Trulieve opened three new stores in Florida, while MedMen had to temporarily shut down five of its medical cannabis outlets in Florida in May. MedMen didn't specify why, but the reasons are evident from the financial struggles that have been pinning it down for a while now. MedMen now has three stores open in the state.

What will the recreational marijuana market bring?

A campaign in Florida tried to legalize recreational marijuana this year, but the pandemic caused numerous challenges.

The lockdown made it hard for activists to collect enough signatures to make recreational legalization proposals qualify for the state's November 2020 ballot. Hence, the group is now trying for a 2022 legalization. The demand is exceptional in the state, so a recreational market will bring additional revenues for Trulieve. But its dependency on medical marijuana could make it difficult for it to make a sudden jump to the new market. 

The only concern

Trulieve's revenue growth is no doubt staggering, and medical cannabis demand is unlikely to plummet anytime soon. Trulieve has also secured its financial position with a strong balance sheet that will help it survive the crisis. The company ended the first quarter with $100.8 million in cash and cash equivalents.

What worries me is Trulieve's dependence on a single market: medical marijuana. It's intriguing to note the rate at which peer companies are expanding in various states. Curaleaf and Green Thumb Industries are expanding at rocket speed despite the pandemic. And they have business in both the medical and recreational arenas. 

That said, Trulieve is outperforming its Canadian peers, and it has strong fundamentals and footing in Florida from which to expand into other states. Shares of Trulieve are up 6% year to date, while rivals Aurora Cannabis and Canopy Growth are down 52% and 23.3%, respectively.

Trulieve could turn out to be a strong cannabis player when the marijuana industry blossoms after U.S. federal legalization. In other words, it's worth considering if you're interested in long-term growth.