TerrAscend Corp Up 260% From March Lows, Remains Bullish

TerrAscend Corp Up 260% From March, Still Bullish on Strong Q2 ResultsTerrAscend Stock Could Triple Again

TerrAscend Corp (OTCMKTS:TRSSF, CNSX:TER) is not hogging the cannabis spotlight like it should be; it’s not even sharing it. But that could soon change.

One of the most unjustly neglected cannabis stocks, TRSSF stock has been quietly rewarding investors since the start of the year. TerrAscend stock is up approximately 90% since the start of 2020 and 260% since hitting March lows of $1.19 per share.

There is good reason for those gains. First- and second-quarter results showed revenue and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) both jumping. And thanks to the company’s ongoing strength, TerrAscend has a solid outlook.

TRSSF Stock Overview

Most U.S. investors are not all that familiar with TerrAscend, mostly because the Mississauga, Ontario, Canada-based company started out focused on the Canadian market as a licensed operator.

Over the last two years though, the company has emerged as a leading U.S. operator.

That was by design. In late 2017, Canopy Growth Corp (NYSE:CGC), Canopy Rivers Inc (OTCMKTS:CNPOF, TSE:RIV), and JW Asset Management,LLC together invested $52.5 million in TerrAscend to collectively own a 61% stake in the company. (Source: “TerrAscend Closes $52,500,000 Private Placement Financing,” TerrAscend Corp, December 11, 2017.)

One of the goals of the equity financing was to help build out the company in the U.S., and it has been working.

As a result of that financing, TerrAscend emerged as the first North American legal marijuana company with scale operations in both the U.S. and Canada. (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.)

In the U.S. the company has focused its efforts on markets with the highest growth potential, including California, Pennsylvania, and New Jersey.

An integrated recreational and medical cannabis company, TerrAscend supplies products, brands, and services to the global cannabinoid market. In fact, TerrAscend Corp is the only legal marijuana company with sales in the U.S., Canada, and Europe, the three largest cannabis markets in the world.

The company has more than 450,000 square feet of cultivation and production assets and 11 retail locations that are either in operation or under development. It also has six in-house brands. (Source: “Investor Presentation, July 2020,” TerrAscend Corp, last accessed August 20, 2020.)

TerrAscend also holds a Medical Cannabis Processor License in the State of Utah.

Chart courtesy of StockCharts.com

Strong Q2 2020 Sales & Adjusted EBITDA

On August 20, TRSSF announced its financial results for the second quarter ended June 30, 2020. Net sales for the quarter increased 169% year-over-year and 36% sequentially to CA$47.2 million. (Source: TerrAscend Corp, August 20, 2020, op. cit.)

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

During the second quarter, TerrAscend increased production and wholesale capacity in Pennsylvania and enacted store expansions in Pennsylvania and California.

Adjusted EBITDA was CA$11.4 million, compared to CA$4.9 million in the first quarter of 2020 and an adjusted EBITDA loss of CA$8.6 million in the second quarter of last year.

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

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

“We are producing strong revenue growth while maintaining our focus on delivering industry leading margins and profitability,” said Jason Ackerman, CEO and executive chairman.

He added, “After achieving our first quarter of positive EBITDA in Q1, we have now achieved another significant milestone of positive cashflow from operations in Q2.”

For fiscal 2020, TerrAscend expects to report full-year revenue of at least CA$192.0 million. It also expects to report adjusted EBITDA of at least CA$45.0 million.

Analyst Take

TerrAscend stock is an excellent cannabis stock that has made strong moves in 2020. It’s trading in a much more attractive range than its peers, with strong near- and long-term growth potential.

As mentioned earlier, TerrAscend Corp reported solid first- and second-quarter revenue and adjusted EBITDA growth. The company also reported its first quarter of positive cash flow from operations.

Looking ahead, despite short-term challenges facing the global economy, TerrAscend is on track, both operationally and financially, to deliver on its goals of strong revenue growth and positive adjusted EBITDA.