TerrAscend Corp: Pot Stock up 381% Since March, but Could Easily Double

Why TerrAscend Corp Stock Could Easily Double from Here

TerrAscend Corp (OTCMKTS:TRSSF; CSE:TER) isn’t an American cannabis stock, but an increasingly larger portion of its revenue is coming from the U.S. And gaining traction in the world’s largest pot market is only going to help it when recreational cannabis is legalized in the U.S.

TerrAscend Corp stock has been quietly lighting up the marijuana industry. TRSSF stock is up 51.3% year-over-year, has climbed 155.7% in 2020, and is up a whopping 381.5% since hitting March lows. It’s currently sitting at its highest level since May 2019.

Why are investors so bullish on TerrAscend? Despite the coronavirus pandemic shutting down the global economy in the second quarter and COVID-19 numbers rising again in the U.S. and around the world, TRSSF reported strong first- and second-quarter financial results and strong guidance.

On October 6, the company also announced that it has started to generate revenue from its newly expanded State Flower cultivation facility in San Francisco. The facility expanded from 5,000 square feet to 20,000 square feet.

Chart courtesy of StockCharts.com

TerrAscend Corp Overview

Mississauga, ON, Canada-based TerrAscend started out focused on the Canadian market, but over the last two years, it has emerged as a leading U.S. operator. Back in 2017, Canopy Growth Corp (NYSE:CGC, TSE:WEED), Canopy Rivers Inc (OTCMKTS:CNOPF, TSE:RIV), and JW Asset Management, LLC together invested $52.5 million in TerrAscend. Collectively, they own a 60% stake in the company. (Source: “Investor Presentation, September 30 2020,” TerrAscend Corp, last accessed October 19, 2020.)

The goal of the equity financing was to help build out the company in the U.S. And it did just that. In October 2018, TRSSF pivoted its operations to the U.S. market. (Source: “TerrAscend Closes $52,500,000 Private Placement Financing,” TerrAscend Corp, December 11, 2017.)

Today, TerrAscend is the first North American Operator with operations in both the U.S. and Canada.

In Canada, it operates in the medical and recreational adult-use 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.

TerrAscend Corp is also the only cannabis company with sales in the U.S., Canada, and Europe, the three largest cannabis markets in the world.

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

TerrAscend Corp holds a cultivation permit in the State of New Jersey and is pending approval for a vertically integrated medical cannabis operation with the ability to operate up to three alternative treatment centers. Additionally, TerrAscend holds a Medical Cannabis Processor License in the State of Utah.

Strong Q2 2020 Revenue & Adjusted EBITDA

On August 20, TRSSF announced its financial results for the second quarter ended June 30, 2020. All results are in Canadian dollars.

Revenue for the second quarter jumped 169% year-over-year and 36% sequentially to $47.2 million. (Source: “TerrAscend Reports Strong Second Quarter 2020 Net Sales of $47.2 Million and Adjusted EBITDA of $11.4 Million,” TerrAscend Corp., August 20, 2020.)

Geographically, the U.S. was responsible for most of those sales. Net sales in the U.S. were $42.2 million, or 90% of total consolidated sales.

The company’s net loss improved to $13.6 million from last year’s net loss of $19.1 million.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $11.4 million, compared to an adjusted EBITDA loss of $8.6 million in the same period last year and $4.9 million in the first quarter of 2020.

Cash flow from operations was $10.4 million, representing the first quarter of positive cash flow from operation in the company’s history.

TerrAscend ended the second quarter with cash and cash equivalents of $75.0 million, versus $17.0 million at the end of the second quarter of 2019.

TerrAscend Corp’s 2020 Outlook

For fiscal 2020, TerrAscend now expects to report:

• Full-year revenue of at least $192.0 million, a 125% increase over the $84.9 million in 2019
• Adjusted EBITDA of at least $45.0 million, a 70% increase over 2019 adjusted EBITDA of $26.6 million

Analyst Take

TerrAscend Corp is a great marijuana stock that is, for now, mostly overlooked. That’s mainly because it trades over-the-counter. But it’s also one of the pot stocks that deserves to uplist to the Nasdaq.

In the U.S., it is ranked as one of the top five multi-state operators across key operational statistics: gross margin, revenue, EBITDA, and adjusted EBITDA. That’s evidenced by its strong second-quarter results, which saw strong momentum continue across all key metrics. The company’s outlook for fiscal 2020 remains equally as strong.