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Terra Tech: An Analysis

Daniel Goldman profile picture
Daniel Goldman
433 Followers

Summary

  • Terra Tech has two primary divisions, one which does not deal with cannabis and one that does.
  • While revenue growth for Terra Tech has been positive, net income has not.
  • Even with a current increase in net loss, I see Terra Tech as having significant growth potential.

In "Cannabis Stock Pick: MassRoots," I wrote about MassRoots as my first cannabis pick because, even though it has been going through some hard times, the average growth in both revenue and net income was positive. However, there is another company which has significant revenue growth: Terra Tech (TRTC).

Unfortunately, TRTC is seeing an increase in net losses as well, mainly due to increasing SG & A expenses. However, Terra Tech expanded its facilities throughout 2016, and that expansion may be a large factor. Therefore I expect to see even more revenue gains throughout 2017.

Furthermore, a main reason why I selected Terra Tech, even though it did not fit the positive net income growth screening was because the company is diversified into non-cannabis and cannabis related operations.

Edible Gardens

Terra Tech has a subsidiary, Edible Gardens, which "provide[s] fresh, locally grown herbs and leafy greens to supermarkets, restaurants and the food service industry."

This brand is available in major super markets. Indeed, I have purchased the product from Shop Rite, not even realizing that the brand was owned by Terra Tech. Having revenue from this subsidiary means that Terra Tech will not have to worry as much about changes in marijuana legislation.

In addition, the product is in line with the consumer movement towards organic and sustainable products.

Marijuana Component

Terra Tech's marijuana component is largely focused on medical cannabis, which will likely be more protected from federal crackdowns.

Regarding structure, production is vertically integrated, and so the company is involved in growing and processing the raw plant material, as well as selling the end product.

While the focus of IVXX is medical marijuana, with the legalization of recreational marijuana, Terra Tech was working on expanding its facilities. As I mentioned earlier, while revenue has been growing, so has net loss. However, the following projects are

This article was written by

Daniel Goldman profile picture
433 Followers
I am an occasional investor/trader and researcher. I use a combination of market theory and economic theory to determine my trading strategies, but focus on periods where contrarian actions seem reasonable, such as when market expectations seem to be trending in the opposite direction as fundamentals. Research Topics I am interested in the relationship between pattern day traders and investors and how value flows between these two groups.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in TRTC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

I am also working on building a portfolio of cannabis stocks, which I will increase in size as new information comes out about legalization on the federal level.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (144)

How about an update to this analysis?
greek girl profile picture
I hope you are both right. I think their balance sheet, assets vs liabilities etc. looks good and I believe they are well diversified. But certainly wouldn't hurt my feelings to see insiders buying for a change. I am looking at MCIG and IVITF . little to no debt.
ap17 profile picture
ap17
25 Jul. 2017
Agreed MJ
mjrose10q profile picture
In and out, short term actions are personal methods that are not my style. I believe a big downward stock market action is coming in short order this year. I look towards TRTC and other similar young companies to hold their ground in this coming bear market. I strongly see heavy increases in the sales and distribution of product with the encouraging actions of the state hungry for tax revenues. This is the ground floor base for this whole industry.
greek girl profile picture
I am totally confused , Darren do you like the stock? or are you worried about greedy management. i think the blum business in Nevada is gonna be great! And they are diversified. I just bought at ..23 sold at .29 and when I saw it go to .32 I got back in.. at .29. Should I take my loss and run for another green mountain?
ap17 profile picture
ap17
24 Jul. 2017
GG, no need to take a loss. It will recover from that drop and move higher than .29.
g
That was nice of the insiders to let TRTC run for a couple days...
g
Maybe there full for now. Although I doubt it.
g
TRTC should be a $5-$10 growth stock ready to surge, but unfortunately greedy hands are on the wheel. This of all green growth stocks has been the greatest disappointment. I would love to see new management somehow take this over and make it into the powerhouse it could (& should) be.
belgium profile picture
Equity financed. Most progress , comes at a price. And management loves to make sure they eat first, leftovers are for shareholders.
Darren McCammon profile picture
TRTC is in decline because it trades completely on emotion and news, and represents no fundamental value for existing shareholders. Frankly, most of the publicly traded marijuana stocks are that way. Project all the growth you want. It does not matter because management continuously appropriates any value via issuing themselves more and more convertible preferred. If TRTC instead used their overpriced stock to buy other marijuana assets at lower multiples than what they trade, it could make sense. However, that is not what they do.

You do not need to believe me, its all there in the 10Qs for people willing to do the work. For example figure out what multiple on EBITDA they paid insiders for the Blum Acquisition.
jesus7 profile picture
Figure out the opportunity cost to secure a similar opportunity as blum was / is or create it anew? The cheap route in CA did not exist.

Licenses required, insurance and locations, how long would that take..Ha!

I think you underestimate the intrinsic value of blum PLUS 'Patients'

Blum was the best choice, CA is a huge market; GDP of France!
Darren McCammon profile picture
'Project all the growth you want. It does not matter because management continuously appropriates any value via issuing themselves more and more convertible preferred.'
Darren McCammon profile picture
In case anyone was worried about insiders running out of shares due to preferred conversions and sales, they granted themselves another 6.75 million shares a few days ago:

Derek Peterson 1.5
Micheal Nahass 1.5
Ken VandeeVrede 1.5
Micheal James 1.5
Steven Ross .75

http://tinyurl.com/ybb...#
a
free falling :(
Daniel Goldman profile picture
Cannabis index, as a whole, is in decline. It's probably due to the increased concern over the Trump administration's policies regarding marijuana.
j
4.4 million!
belgium profile picture
Not just new hires.

"The increase was primarily due to an increase in salaries due to new hires associated with the Blüm dispensaries. Other expenses include an increase in consultants' fees in connection with the Nevada business and an increase in amortization expense due to intangible assets acquired in the Black Oak Gallery acquisition"

I read the report rather fast , but i think it was about 500k up on consultants alone. Don't know if that's where the lobbying part comes in.

And the amortization is probably the killer here.
ap17 profile picture
10MM loss revs up to 6.8MM for the Q Not bad.
belgium profile picture
Not bad is not how we should be looking at this report. It's not good. Some items are questionable, to say the least.

let's see what they have to say, if they bother to anyway.
j
Like 4.4 million in admin costs due to New hires?
Daniel Goldman profile picture
> Like 4.4 million in admin costs due to New hires?

Given their known expansions, why is that questionable?
g
I have been hoping for a surge for awhile now as I continue driving my average down through accumulation. This should be a nearly billion dollar company.
g
The first quarter results of 2017 is suppose to come out tomorrow morning before opening bell, with CC at 9am. A little different then usually. A lot of times its after markets close on Friday. Maybe with some good news TRTC could see a small run the next 2 days. Then again...
ap17 profile picture
ap17
29 Apr. 2017
Exactly! How many years was it Amazon didn't earn a cent?
Darren McCammon profile picture
What many do not seem to understand no matter how many times you say it and in how many different ways is for the individual shareholder, it does not really matter how much more revenue TRTC has. For every extra $1 in revenue, there is likely to be an extra 100 shares issued. Some will go to management via convertible debt (for LLCs sold to the company, for bonuses, etc.) and some will go to lenders via convertible debt in order to fund build-outs and keep the story going. These two entities, who then turn around and sell the shares, are the real beneficiaries of any improvements in the TerraTech business, not the individual shareholder. Any potential value for individual shareholders just gets diluted away.
belgium profile picture
Sure, when a public company needs cash, that's the way it operates. When a private company needs cash, they start emailing and calling investors for extra funds.

Same thing. And some don't even have revenues, just cash burn.

We are "investing" in start-ups, not blue chips. In the OTC sewers, and everything that comes along.
mjrose10q profile picture
Hello Darren,
Yes, your views might be the short term norm. Longer term I a super leading edge giant within this field. plowing dollars back into building a future powerbase that has the ability to supply the grown product on a mass scale is great business. The company will have ability to, if it makes business sense, to buy back huge amounts of stock.
g
And the teen's would of been the right time too reload.
g
...or average down.
j
TRTC is a dead stick and in free fall. We are all going to lose.
belgium profile picture
There is a time to buy and a time to sell your holdings. If you paid attention the past years you know the time to sell was a couple weeks ago, and now you should be hawking a reload for the next event.

Now it's "the sky is falling" and "run for the hills" , and in a few it will all be "rah rah" and "to the moon".

Either you hold and stop complaining, or you flip the events. Just save the BS for the other boards.
j
Just stating the truth bro.
g
Like I said before, I think since 2015 only one director has bought shares. At least throw us a bone every now and then. It would give shareholders a little confidence.
Norsk64 profile picture
Yes, but in smaller numbers and spread out more. Seems like every day since earnings release, there is yet another insider selling large blocks of stock. Any thoughts on a bottom?
Daniel Goldman profile picture
It is hard to say why selling is occurring. Locking in gains? Need money? Revenues continue to rise, which is a good sign. Fundamentals, if honestly reported, are strong. There is of course always risk, including risk of increased federal action against the marijuana industry. Insiders may just be hedging against that.

I am not worried. So long as the fundamentals are sound, the stock will rise in the long run. I am not looking for a quick buck.
belgium profile picture
Hard to say? Come on guys, the same thing happens every year since this started. Build up to a certain date, sell off, consolidation and reload, and then the ra ra for the next event starts.

We are in the OTC sewers.
jesus7 profile picture
Not a mystery it's tax time and when employee's are paid with stock, no use in going broke.

All those transactions are the same, just confusingly re-posted by different computer generated pay for news sites, if you want to see all the sec transaction forms go to SEC.gov.

http://tinyurl.com/q9w...
Norsk64 profile picture
The insider selling continues at a rapid pace. Just waiting for the office Secretary to announce she sold also! Makes the price drop make more sense, and as a result, less "cents" in regards to new low with PPS. Very frustrating!
Darren McCammon profile picture
I don't know why you are frustrated, if you had an unlimited supply of shares, you would be selling too.
jesus7 profile picture
Actually it's all the same transactions re-posted by every computer run site like BB~BS, CERBIANGEM etc..

Basically you can pay to run a story thru them, a form of short advertising / campaign.
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