TerrAscend Corp: Pot Stock Up 38% Since Election; Record Q3 Results

TerrAscend Stock Up in 2020 & 2021 Looks Even Better

TerrAscend Corp (CNSX:TER, OTCMKTS:TRSSF) stock has performed better since the U.S. election than most stocks do in an entire year. For that matter, TRSSF stock has been on fire since the start of October.

As of this writing, TerrAscend stock is up 38% since the start of November and an even more impressive 90% since the start of October. TRSSF stock is also up 243% year-to-date and 187% year-over-year.

Big gains, but as you’ll see below, there are a number of reasons why 2021 looks like it could be an even better year for TerrAscend stock.

Chart courtesy of StockCharts.com

TRSSF Stock Overview

TerrAscend was the first North American legal marijuana operator with scale operations in both Canada and the U.S. It was also the first cannabis company to generate sales from the U.S., Canada, and Europe—the three largest marijuana markets in the world. (Source: “Investor Presentation,” TerrAscend Corp, September 30, 2020.)

In Canada, TerrAscend operates in the medical and recreational marijuana markets. In the U.S., the company has operations in markets with the highest growth potential, including key states like California, New Jersey, and Pennsylvania.

The seed-to-sale company’s operations include the following:

• Ilera Healthcare, Pennsylvania’s premier medical marijuana cultivator, processor, and dispenser
• The Apothecarium, an award-winning marijuana dispensary with several retail locations in California
• Valhalla Confections, a manufacturer of premium marijuana-infused edibles
• Arise Bioscience Inc., a manufacturer and distributor of hemp-derived products

TerrAscend holds a cultivation permit in New Jersey and is awaiting approval for a vertically integrated medical marijuana operation with the ability to operate up to three alternative treatment centers.

TerrAscend also holds a Medical Cannabis Processor License in Utah.

TerrAscend recently completed the expansion of its State Flower cultivation facility in San Francisco, from 5,000 square feet to 20,000 square feet. This has resulted in a 500% increase in total output and makes it the largest legal cannabis cultivator in San Francisco. (Source: “TerrAscend Commences Sales from Newly Expanded State Flower Cultivation Facility,” TerrAscend Corp, October 6, 2020.)

In early October, the company announced that it had commenced sales from this facility.

On November 6, TerrAscend announced that it had signed a definitive agreement to acquire HMS Health, LLC and HMS Processing, LLC from Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF), for $27.5 million. (Source: “TerrAscend Expands U.S. Footprint Via Acquisition of Maryland Based Grower Processor,” TerrAscend Corp, November 6, 2020.)

The acquisition is expected to be immediately accretive to TerrAscend on an earnings before interest, taxes, depreciation, and amortization (EBITDA) basis.

“This acquisition enables TerrAscend to expand its footprint into another robust limited license medical cannabis market with strong, long-term growth potential,” said Jason Ackerman, executive chairman and CEO.

Record Q3 2020 Results

On November 19, TerrAscend announced that its revenue for the third quarter, ended September 30, increased 90% year-over-year, 8.5% sequentially, and 45% compared to the first quarter, to $51.0 million. (Source: “TerrAscend Reports Record Third Quarter 2020 Net Sales of $51 Million and Adjusted EBITDA of $17.8 Million,” TerrAscend Corp, November 19, 2020.)

The company reported a third-quarter net loss of $17.6 million, versus a third-quarter 2019 net loss of $17.3 million. The still-sizeable net loss was mostly a result of a net increase in fair value of warrant and derivative liability of $22.2 million and a revaluation of contingent consideration of $8.1 million.

More importantly, perhaps, was TerrAscend’s adjusted net income of $12.7 million, a positive result for the first time in its history. In the third quarter of 2019, the company reported an adjusted net loss of $17.3 million.

Third-quarter 2020 adjusted EBITDA was $17.8 million, compared to $11.4 million in the second quarter of 2020 and a loss of $6.6 million in the third quarter of in 2019.

TerrAscend Corp ended the third quarter of 2020 with cash and cash equivalents of $45.0 million, compared to $6.9 million on September 30, 2019 and $75.0 million on June 30, 2020.

Management increased their full-year 2020 guidance to at least $196.0 million in revenue and at least $65.0 million in adjusted EBITDA. For 2021, the company expects to report full-year net sales of $360.0–$380.0 million and adjusted EBITDA between $140.0–$160.0 million.

Analyst Take

TerrAscend stock is an overlooked pot stock that keeps getting better.

In the U.S., the company expanded its Pennsylvania cultivation facility by 25% and its California facility by 500%. In New Jersey, sales from its new cultivation facility and first retail location in Phillipsburg were expected to begin in late November.

In Canada, TerrAscend Corp expects to see positive contributions to its sales and profit growth in 2021.

This all bodes well for the value of TRSSF stock.