The biggest names in the cannabis sector continue to attract all the media attention, and for good reason: they’re industry juggernauts and are considered bellwethers.
But this earnings season, there are a growing number of overlooked marijuana stocks reporting strong financial results.
Two of the more interesting small marijuana stocks that crushed it this earnings season are Terrascend Corp (OTCMKTS:TRSSF, CNSX:TER) and iAnthus Capital Holdings Inc (OTCMKTS:ITHUF, CNSX:IAN). Best of all, both companies provided strong outlooks.
All of which means investors should pay close attention to these two under-the-radar cannabis plays.
Terrascend is the first North American marijuana company with scale operations in both the U.S. and Canada. It’s also the only cannabis company that has logged sales in the U.S., Canada, and Europe. (Source: “Terrascend Investor Presentation, October 2019,” Terrascend Corp, last accessed November 22, 2019.)
The Mississauga, Ontario, Canada-based Terrascend Corp is a recreational and medical cannabis company that supplies products, brands, and services to the global cannabinoid market.
“Apothecarium” is the company’s award-winning cannabis dispensary, with retail locations in Nevada and California.
Terrascend’s acquisition Arise Bioscience Inc manufactures medical marijuana, Ascendant Laboratories is a biotechnology and licensing company, and Valhalla Confections manufactures premium cannabis-infused edibles.
Recent developments have helped bring more attention to Terrascend’s long-term potential.
In October, it received a license from Health Canada to sell cannabis extracts, edibles, and topicals. (Source: “TerrAscend Receives License to Sell Cannabis Extracts, Topicals, and Edibles,” Terrascend Corp, October 22, 2019.)
Terrascend is also in the process of expanding its cultivating and processing facility, from 17,800 square feet to 51,800 square feet. (Source: “TerrAscend Canada Triples Licensed Cultivation and Processing Capacity,” Terrascend Corp, October 7, 2019.)
This crucial step will help Terrascend get its products into Europe and other international markets.
TRSSF Stock Information
|Market Cap||$141.7 Million|
|Shares Outstanding||52.8 Million|
|50-Day Moving Average||$3.38|
|200-Day Moving Average||$4.61|
(Source: “TerrAscend Corp. (TRSSF),” Yahoo! Finance, last accessed November 22, 2019.)
Terrascend’s Q3 Revenue, Gross Profit, & Adjusted EBITDA Went Up
In August, Terrascend reported record second-quarter revenue and raised its full-year guidance.
The company continued its winning ways in the third quarter, with strong revenue growth and margin improvements.
Revenue for the third quarter increased 53% sequentially to $26.8 million and was up significantly from the $1.8 million recorded in the same period last year. (Source: “TerrAscend Announces Strong Revenue Growth and Margin Improvement for the Third Quarter of 2019,” Terrascend Corp, November 20, 2019.)
Gross profit was $7.0 million, versus $2.2 million in the second quarter and a loss of $600,000 in the third quarter of 2018.
Terrascend reported a third-quarter adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) loss of $6.5 million, compared with a loss of $8.7 million in the second quarter of 2019 and a loss of $6.3 million in the third quarter of 2018.
The company ended the third quarter with $6.9 million in cash and cash equivalents. Since then though, it has closed on two tranches of previously announced private placement, for total proceeds of $18.0 million.
Looking ahead, Terrascend expects to report significantly higher revenue and continued improvement in adjusted EBITDA in the fourth quarter and in 2020.
The company also recently expanded its portfolio of U.S. assets, booked its first international shipment of cannabis to Europe, and tripled the licensed space at its Mississauga facility.
Because of these recent developments, Terrascend stock is on track to deliver long-term growth for shareholders.
iAnthus Capital Holdings Inc
iAnthus is another great cannabis stock that, because of its small size, and the fact that it’s based in the U.S.—where cannabis isn’t federally legal—has been unjustly overlooked.
And frankly, the company’s name screams starched shirt and tie, not marijuana.
Regardless, the New York City-based iAnthus Capital Holdings Inc owns and operates a number of licensed cannabis cultivation, processing, and dispensary facilities in 11 states. (Source: “Investor Presentation,” iAnthus Capital Holdings, November 2019.)
You can find its more than 1,000 branded products in both its own dispensaries and in 1,500+ other stores.
This past February, iAnthus closed on its previously announced $620.0 million acquisition of MPX Bioceutical Corporation. (Source: “iAnthus and MPX Bioceutical Announce Closing of Transformational $1.6 Billion Business Combination,” Cision, February 5, 2019.)
The addition of MPX Bioceutical increased iAnthus’s presence in the U.S., allowing it to operate more retail locations and expand its cultivation and processing space.
And in September, the company entered into an agreement to acquire WSCC, Inc. (also known as Sierra Well), a Nevada-based cannabis company with two dispensaries and more than 20,000 square feet of cultivation/production space. (Source: “iAnthus Expands Nevada Footprint with Agreement to Acquire Vertically Integrated Northern Nevada Operator,” Cision, September 19, 2019.)
The company also recently announced a $100.0-million financing plan with Gotham Green Partners to help its expansion efforts in Florida, New Jersey, and New York. (Source: “iAnthus Reports Fiscal Third Quarter 2019 Financial Results,” iAnthus Capital Holdings Inc, November 20, 2019.)
ITHUF Stock Information
|Market Cap||$226.5 Million|
|Shares Outstanding||156.0 Million|
|50-Day Moving Average||$1.47|
|200-Day Moving Average||$2.64|
(Source: “iAnthus Capital Holdings, Inc. (ITHUF),” Yahoo! Finance, last accessed November 22, 2019.)
iAnthus’s Pro-forma Q3 Revenue Up 23%, Adjusted EBITDA Loss Improves
On November 20, iAnthus announced that its third-quarter revenue increased 16% sequentially to $22.3 million. Pro-forma revenue was up 23% from the prior quarter at $30.9 million. Thanks to new customer retention and its acquisition strategy, retail revenue was up 28%. (Source: iAnthus Capital Holdings Inc, November 20, 2019, op cit.)
The company says that disciplined cost control initiatives helped the company improve its adjusted EBITDA loss (net of biological assets) to $3.6 million, from a loss of $6.9 million in the second quarter.
iAnthus reported a third-quarter net loss of $15.3 million, compared to a loss of $9.3 million in the prior quarter.
During the third quarter, iAnthus increased total production 11% sequentially from 5,300 to 5,900 pounds.
Thanks to the solid results, management said the company is well on its way to positive EBITDA in 2020, and that it has improved its ability to generate operating cash flow.
It apparently takes more than strong financial results for certain cannabis stocks to garner investor attention. iAnthus Capital Holdings Inc and Terrascend Corp are great penny-stock cannabis companies that reported strong third-quarter financial results and solid outlooks.
Both have strong balance sheets and are expanding their operations, launching new products, and increasing their geographic footprints.
Still, iAnthus stock and Terrascend stock are under the radar—but perhaps not for long.