• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

TerrAscend Gains Ground in 2020

The cannabis name is budding into a serious contender in the industry -- and is catching the eyes of impressed analysts.
By DEBRA BORCHARDT
Jun 03, 2020 | 02:00 PM EDT
Stocks quotes in this article: TRSSF

While other cannabis companies have been grabbing the headlines, TerrAscend  (TRSSF) has been quietly building itself into a serious contender in the industry. The company has gotten off to a better start in 2020 after posting a series of charges in its 2019 year-end numbers related to its Ilera Healthcare division, as it redeems itself among analysts.

The fourth-quarter net loss was a staggering $127 million. The company said that the change in adjusted earnings before interest, taxes, depreciation and amortization -- compared to the prior year period -- was primarily driven by a decline in Canadian cannabis revenues. Those lower revenues were a result of ongoing demand issues. While the net losses haven't completely disappeared, it seems the company is on track to turn things around this year.

TerrAscend is best known for its Apothecarium brand of dispensaries in California, but it turns out that Pennsylvania has been a sleeper hit.

The company reported total revenues for the first quarter of $34.8 million, an increase of 34% sequentially. Most of the growth was driven by the Ilera Healthcare business unit in Pennsylvania. TerrAscend tripled the production capacity in the state and it is exploring an additional 15% expansion of its production capacity in the state.

"We believe Ilera has the potential to drive at C$150-175 million a year of revenue without further expansion of its product facility in Waterfall, PA," wrote Clarus Securities analyst Noel Atkinson. That's about $111 million to $129 million in U.S. dollars.

The company also said that it expects in the second quarter it will see an additional 30% growth in revenue to approximately $33 million and that it will be driven primarily by the operations in Pennsylvania. The company did this off of one dispensary in Plymouth Meeting, Pa., and has just opened another in Lancaster and has plans for one more in that specific region. The company is limited to three stores for this license according to the rules in the state, but could acquire another license.

TerrAscend is continuing new store openings in California, as well as following the successful acquisition of The Apothecarium in San Francisco. Another is planned for Berkeley, where it will be one of only seven dispensaries allowed in the city. It will also be one of the closest to the University of California-Berkeley campus. TerrAscend has also leased a retail spot in Oxnard, Calif., as it pursues a license there as the company works its way south down the state.

This leaves New Jersey in the portfolio. The Philipsburg store in northwestern New jersey will be its first in the Garden State and the first in Warren County. If New Jersey legalizes recreational marijuana in the fall, the company could open additional stores. Management has said it has one potential location locked up and is working on a third. Analysts are planning on a new store in the first quarter of 2021 and third in the second quarter.

Analysts Putting TerrAscend on Radar

Analysts for multi-state operator TerrAscend seemed somewhat surprised with the company's first quarter 2020 earnings last week, as it hit a home run in the state of Pennsylvania.

AltaCorp Capital analyst Kenric Tyghe wrote in a report dated May 25, "We believe that the option value of recreational cannabis legalization in New Jersey in 2020e and the possibility of Pennsylvania in 2022e represent material potential positive catalysts to both earnings trajectory, earnings visibility and the imputed multiple expansion that a step change in these metrics supports through our forecast window."

He has an Outperform rating and a 12-month target price of about $5.92, which he believes is conservative. Tyghe said he thinks TerrAscend is on the right side of the curve and well positioned to become a market leader.

Clarus Securities analyst Atkinson set his target price at about $6.47 and has a Buy rating on the company. He says 2020 will be a transformational year for the company.

"This year should be a watershed year for TerrAscend's U.S. operations, given the combination of Ilera's expansion in Pennsylvania, the expected launch of operations in New Jersey and the new store openings in California. We believe TerrAscend remains positioned to be one of the highest-margin MSOs in the U.S. and to quickly achieve free cash flow."

Stifel analyst Robert Fagan has a Buy rating on the company and a target price of around $4.44. 

"After a kitchen sink style quarter in Q4, TER's Q1 EBITDA surprise and solid Q2 guidance suggest the company's growth and profit momentum have rapidly turned the corner," wrote Fagan, noting that the company's margins compare favorably with the majority of its peers.

Looking Ahead

The company's net losses in 2019 were about $159 million, but they are expected to drop down to about $17 million in 2020. Its Canadian businesses look to be a weak spot, but improving. The company ended the quarter with about $23 million in cash and JW Asset Management has reaffirmed its commitment by leading a $37 million convertible preferred share offering. The stock has lifted from a low of $1.33 in March to lately trading at $2.26.

It seems TerrAscend is making a quick comeback and getting on analysts radar.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Borchardt had no positions in any securities mentioned.

TAGS: Investing | Stocks | Canada | Cannabis

More from Stocks

Coupang Could Make a Bigger Trading Bounce

Bruce Kamich
Jul 1, 2022 1:56 PM EDT

Here's where nimble traders could probe the long side.

Shares of Xencor Could Be Bought on a 50% Correction

Bruce Kamich
Jul 1, 2022 11:59 AM EDT

Traders should remain patient.

Let's Size Up the Market's Prospects for the Second Half of 2022

Bret Jensen
Jul 1, 2022 11:30 AM EDT

The next six months can't be worse than the first six, can they?

In an Ugly First Half for Stocks, Value Was a Lot Less Ugly Than Growth

Jonathan Heller
Jul 1, 2022 11:00 AM EDT

A look at the Russell indexes shows that value stocks suffered in the first six months of 2022 but not nearly as much as growth issues.

Nuvalent Has Begun the Bottoming Process

Bruce Kamich
Jul 1, 2022 10:52 AM EDT

Let's check the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:59 PM EDT PAUL PRICE

    Very good quarterly numbers from Bassett Furniture (BSET)

    Bassett Furniture (BSET) blew right through analys...
  • 04:41 PM EDT PAUL PRICE

    First Half Results - Putrid Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 marked...
  • 04:51 PM EDT PAUL PRICE

    We Should Be in for Better Starting Soon

    Window dressing Thursday, the last day of the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login