TerrAscend Corp: U.S. Expansion Could Double Its Share Price

Canadian Pot Player Expands Stateside

While Canada was the first and, so far, only Western country to federally legalize recreational marijuana, the holy grail for pot operators remains the massive U.S. marijuana market.

That’s the target of TerrAscend Corp (CNSX:TER, OTCMKTS:TRSSF), a Canadian small-cap vertically integrated producer and seller of recreational and medical marijuana in Canada and the U.S. (Pennsylvania, New Jersey, Maryland, and California).

TRSSF stock traded as low as $1.19 in March 2020 during the COVID-19 pandemic sell-off, prior to staging an impressive rally to $16.25 during the “Reddit”-driven buying in February 2021.

TerrAscend stock has since retrenched to below $7.00, down by 34% this year, to where I see an aggressive opportunity to accumulate a position.

TerrAscend Corp has a plan to list its shares on the Nasdaq or New York Stock Exchange, which makes sense as the company increases its exposure in the U.S. marijuana market.

Technical Picture Shows a Potential Double for TRSSF Stock

The below TRSSF stock chart shows a strong rally from July 2020 after the surfacing of a golden cross pattern, a bullish technical sign that appears when the 50-day moving average breaks above the 200-day moving average.

After trading at its February high, TerrAscend stock has struggled, along with the rest of the marijuana stocks.

TRSSF stock needs to find support, but investors should be careful due to the recent death cross pattern, in which the 50-day moving average broke below the 200-day moving average.

A reversal could drive TerrAscend stock toward resistance around $12.00, followed by $15.00 to $16.00.

Chart courtesy of StockCharts.com

TerrAscend Corp’s Revenues Have Been Surging

A look at TerrAscend Corp’s three-year revenue picture shows extremely strong growth. The compound annual growth rate (CAGR) was 440% during this period.

Note that the company’s historical financial results are presented in Canadian dollars. As of this writing, the current exchange rate is US$1.00 to CA$1.26.

(Source: “TerrAscend Corp. ” MarketWatch, last accessed September 9, 2021.)

Looking ahead, TerrAscend has increased its revenue forecast for 2021 to over US$300.0 million (CA$380.0 million), representing growth of 92% versus its 2020 revenue. (Source: “TerrAscend Reports First Quarter Net Sales of USD $53.4 Million and Adjusted EBITDA of USD $22.6 Million,” TerrAscend Corp., May 19, 2021.)

While TerrAscend ramps up its revenues, the company will have to spend capital on its U.S. expansion, which will cut into its earnings before interest, taxes, depreciation, and amortization (EBITDA).

Management is predicting that the company will generate adjusted EBITDA income of more than US$128.0 million (CA$162.0 million) in 2021.

(Source: MarketWatch, op. cit.)

TerrAscend Corp’s U.S. expansion will also cut into its generally accepted accounting principles (GAAP) earnings per share (EPS).

While the company continues to lose money on a GAAP basis, the loss narrowed in 2020, and there could be GAPP diluted EPS profits in 2021 as revenues jump.

(Source: MarketWatch, op. cit.)

TerrAscend Corp’s free cash flow, while negative, improved significantly in 2020 and could turn positive in full-year 2021.

(Source: MarketWatch, op. cit.)

The company’s financial situation is sound. At the end of June, TerrAscend held US$154.0 million (CA$195.0 million) in cash. (Source: “TerrAscend Corp. (TRSSF),” Yahoo! Finance, last accessed September 15, 2021.)

The solid cash balance will give the company financial flexibility, especially as it expands in the U.S. marijuana market.

Analyst Take

TerrAscend Corp’s move into the U.S. pot market provides a strong bull case for TRSSF stock.

Moreover, if TerrAscend stock can gain a Nasdaq or NYSE listing, that would provide a much bigger investor base for the stock.