Why TerrAscend Corp (CNSX:TER) (OTCMKTS:TRSSF) Is A Bounce Back Play

Strong revenue growth and margin improvement are some of the groundbreaking catalysts that could help strengthen TerrAscend Corp (CNSX:TER) (OTCMKTS:TRSSF) prospects in the market. The sentiment comes at a time when the stock appears to have taken a significant hit depicted by a 60% plus slide.

TerrAscend Price Analysis

Amidst the stock underperformance, TerrAscend has continued to fire on all cylinders considering the robust revenue growth. The company has also made tremendous progress, both operationally and financially. Expansion of portfolio of assets, including the IIera Healthcare acquisition as well as the booking of the first international shipment of medical cannabis are some of the other highlights that have come to pass.

The company has also carried out a string of successful capital raises, consequently strengthening the balance sheet. That said, the company remains well-positioned to pursue strategic initiatives crucial to accelerating growth.

The stock has, however, remained under pressure amidst improvement in underlying fundamentals. In recent weeks it has shown signs of bottoming out of the $1.88 level, having emerged, it might have hit a bottom. The $1.75 level has since emerged as the short-term support level curtailing further movements on the downside.

TerrAscend needs to rally and find support above the $2 a share level to affirm it has reached the bottom and due for a correction higher. The stock finding support above the $2 a share could pave the way for it to make a run for the $3 a share level. Likewise, failure to take out the $2 resistance level could leave the stock susceptible to further drops in continuation of the long-term downtrend.

About TerrAscend

TerrAscend is engaged in the development and distribution of quality products and services to the cannabinoid industry. The company maintains operations in the medical and legal adult-use market across Canada and the U.S

Sales Growth and Margin Expansion

Even as TerrAscend continues to trade in a downtrend in the market, it continues to fire on all angles when it comes to the implementation of its core business. Solid financial results underscore a company in a phase of robust growth.

In the third quarter, the company registered a 53% increase in revenues that came in at $26.8 million. Revenue growth was mostly driven by high overall sales in Canada as well as improvements in the U.S. Pro-forma revenues in the quarter stood at $44 million.

Sales growth propelled the company to a gross profit of $7 million more than double $2.2 million reported in the second quarter. However, adjusted EBITDA shrunk to $6.5 million from $8.7 million reported in the second quarter

According to the Chief Executive Officer, Michael Nashat, TerrAscend is on its way to delivering a year of tremendous progress both operationally and financially.

“Looking ahead, we anticipate significantly higher revenue and continued improvement in Adjusted EBITDA margin in the fourth quarter, and further improvement on both fronts next year. While the current Canadian environment has presented challenges for the industry as a whole, the future is bright for TerrAscend and our ability to build long-term shareholder value,” said Mr. Nashat.

2020 Outlook

Going forward, the company intends to accelerate the completion of a New Jersey cultivation and processing facility. TerrAscend has already closed a $20 million Non-brokered private placement expected to fund the facility, which is crucial to enhancing cannabis production capacity. Part of the proceeds will also go towards working capital and other general corporate purposes

In addition, the company intends to strengthen its international operations, having already made its first international shipment to Germany. A strategic distribution agreement with iuvo Therapeutics means TerrAscend is the first and only cannabis operator, with sales in the U.S, Canada, and the EU.

Likewise, the company has entered into an exclusive distribution agreement with Syqe Medical for the launch of its flagship inhaler in the product in Canada

Bottom Line

TerrAscend anticipating improvements in adjusted EBITDA margin and higher revenues in the fourth quarter are just two of the reasons to be bullish about its long-term prospects. International expansion is another development that affirms the company’s long-term prospects as it continues to push for opportunities in Europe. That said, the recent slide might as well have presented an opportunity to take a closer look at the company, as it appears to be trading at a discount relative to its tremendous potential.

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Disclosure: We have no position in TerrAscend and have not been compensated for this article.