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TerrAscend: One MSO To Avoid

Apr. 02, 2021 4:19 PM ETTerrAscend Corp. (TSNDF)CGC, CURLF, WEED:CA39 Comments


  • Despite falling $6 recently, TerrAscend isn't an appealing cannabis stock.
  • The sudden exit of the CEO after only a year on the job is troubling.
  • The stock trades in excess of 10x 2021 sales targets, placing the valuation on the premium side for MSOs.
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Due in part to a partial ownership position by Canadian cannabis giant Canopy Growth (CGC), TerrAscend (TRSSF) has recently reached aggressive valuation levels. The multi-state operator (MSO) isn't positioned for any exceptional growth, but investors likely expect Canopy Growth to buy out the stock when the U.S. approves cannabis at the federal level. Investors should look elsewhere for better bargains in the cannabis space, especially with the CEO suddenly leaving the company.

Image Source: TerrAscend website

Booming Business

Like most MSOs, TerrAscend has seen sales explode in the last year. The company grew 2020 sales by 134% to reach C$198 million while Q4 sales were up 152% to reach C$65 million.

The company recently opened a dispensary in New Jersey and expects to have 3 stores open in the state by Q3. In addition, TerrAscend is one of the few MSOs expanding operations in California with the recent opening of a 5th dispensary in the state.

The MSO is in the process of acquiring the Maryland operations of HMS Health, LLC from Curaleaf (OTCPK:CURLF) to provide for further growth. Ultimately though, TerrAscend has limited operations with a focus on Pennsylvania, New Jersey and the highly competitive California.

Source: TerrAscend March 2021 presentation

In fact, the company is primarily focused on sales in Pennsylvania with 1 of 5 vertically integrated licenses and an estimated 20% wholesale market share in the medical cannabis state. Even with the business in Canada, TerrAscend should obtain the vast majority of 2022 revenues from Pennsylvania and New Jersey, assuming New Jersey fully opens up recreational cannabis sales.

The lack of access to more limited license states reduces the attractiveness of the stock. The MSO is only in a couple of markets with limited licenses. Despite a booming business, the long-term upside appears rather limited and places TerrAscend at a

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This article was written by

Stone Fox Capital profile picture

Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.

Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.

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Comments (39)

Stone Fox Capital profile picture
Any thoughts on the quarter?

TerrAscend (OTCQX:TRSSF): Q1 GAAP EPS of -$0.08 misses by $0.09.
Revenue of $53.4M (+106.2% Y/Y) misses by $1.02M.
Stone Fox Capital profile picture
$CERAF (Parallel SPAC) trades at less than 2.5x '22 sales targets. Not sure how anybody makes the case to buy $TRSSF instead.
@Stone Fox Capital ,
100% agreed , NCV has a write-up on these guys .. Looks Very solid , and at these prices ... $CERAF , I'm in ... G.L.T.A. invested ...
@Stone Fox Capital What are the numbers? TRSSF is more established, tie in with CGC, management, there are a lot of reasons
D.B. Cooper profile picture
@Stone Fox Capital Terrascend up 10% today in a sea of red 😎
Mebarrett3 profile picture
SF made a name bashing Canadian cannabis stocks, and proved right about the oversupply and nosebleed valuations. However, They seem to be doing it again with MSOs and in this case I think they are wrong. There are such powerful catalysts about to happen that it will be a mistake to move to the sidelines, IMO.
Stone Fox Capital profile picture
So b/c SFC is bearish on one MSO, you think we're making a case for being bearish on all MSOs? My view has been very bullish on $AYRWF, $CURLF and others. This last article was bullish on $CRLBF.

D.B. Cooper profile picture
LMAOOOO... the only reason to invest in Terrascend is that maybe CGC will buy them in future??? Losing credibility on this one💯 No case to be made on their leading positions in Pennsylvania & NJ markets? Very strategic assets in Cali? Indirectly backed by a major CPG company? Jason Wild???? The valuation at $16 was a little difficult to justify BUT a reasonable case was still being made by some. At $10??? SLAM DUNK. Added BIGLY under $10🤑
Stone Fox Capital profile picture
@D.B. Cooper
at this value! Hate investors that drop names and pretend that valuation ins't the biggest part of the equation. Exactly why so many lost their shirts on the Canadians in the first place.
D.B. Cooper profile picture
@Stone Fox Capital lol... wanna know what I hate? Investors that can only think as far as ridged financial ratios. That might work just fine in a static, low growth industry BUT this is cannabis, buddy! Management teams are just as, or even more, important than valuation metrics. Your basing your valuation on the current opportunities that can be forecasted by company & analysts' expectations but Terrascend will certainly look to expand in existing and new markets. Guess what that requires to do successfully? PROVEN CAPITAL ALLOCATORS. The remaining deals out there are getting more expensive by the day and capital is still somewhat limited, so great capital allocators, like Jason Wild, are REQUIRED to find and make deals that are the most accretive and strengthen their position, not only in a particular market, but as a whole across all the various markets they operate. You're better off analyzing telecoms they way you think about company valuations 💯
All Msos are a good buy right now.
Stone Fox Capital profile picture
Nope! Some will far outperform this one.
paw7800 profile picture
100% agreed.
03 Apr. 2021
Unfounded, faulty reasoning. JW is a winner and the CEO did not depart, he was let go. Each change has always resulted in better talent at Terrascend, not to mention huge margins, key markets, and great c-suite talent. From Matt Johnson to Jason Ackerman, I’m sure the next CEO will be a much stronger/better fit and addition to the team. Only a matter of time. Staying long on this one 👌🏼👌🏼
@Stone Fox Capital ,
Great Read , Thanks ..
Yeah , just because CGC has chosen these guys , doesn't mean it's a back up the truck play ..
U.S. based Medicinal , seems to be the near-term play , IMO ..
Again , Biden stated ' Decriminalization ' , meaning that those who have been convicted and did time , and or are doing time , will have their records expunged , up to the legal limits set by the Government , IMO ..
Example ; N.Y. , you can possess up to 3 Oz of MJ. , sooo , those with convictions of 3 Oz's or less should be released and records expunged .. Those concerning higher possession , Non-Violent , may see reduced / commuted sentences ..
Again , Biden stated Status lowering , of which takes MJ. off the LSD , Heron list of drugs having no medicinal value ..
" Having No Medicinal Value " , soo , in essence Medicinal Marijuana will be
' Federally Legal ' with the status lowering ..
Opens up the Banks to the Medicinal aspect of this ' Legalized Medicinal Drug ' .. No Need to rewrite Banking Laws on Legalized Medicinal ..
U.S. Federal Legalization on " Rec. MJ. " will remain a State Issue , until enough States Legalize Rec. .. Currently only 15 ( Now with N.Y. ) have .. Medicinal has ' over ' 33 States Legalized , and when Rec. reaches these kind of milestones , legalization should soon follow ..
Meanwhile , when Medicinal gets the ' Nod ' , will the Canadian
( Cross-Border ) Co.'s benefit ? ...
IMO , depends on how the Laws are written ..
My belief is that the State structure will remain in place , with no importing from Foreign Countries , and interstate cross Bordering will come with Licensing
( Fees ) for those Co's that qualify Medicinally ..
Like You said , many States have Limited Licenses , well guess what , the price of poker has gone up on these licenses ... Co.'s that have these Licenses will be M/A targets , IMO , example Florida's OMMU list .. There's about 5-6 Licenses not producing anything , yet are listed ..
Oh , Just announced , Illinois will surpass the $ 1 Billion sales mark in 2021 ...
Great Read Thanks again ..
Jon Wooldridge profile picture
Upside down, huh? Hate it for ya. I’m stickin.
Josh Felker profile picture
Walks profile picture
Agree with other comments. This is nothing but a hit piece without any depth.
Investor1546 profile picture
@Walks haha nothing but it hit piece? The valuation is extended compared to other MSOs. That’s it. I don’t know how you can really argue with the numbers lol
article is light on analysis and details, more of an off the run opinion. more thorough analytics from Stifel, Cantor, Landenburg and Craig Hallum which are more in depth and focus on the numbers, CEO departure is non event even tho a surprise
Investor1546 profile picture
@EG190 all those companies price targets show limited upside. The numbers show this stock has a rich valuation compared to other MSOs. That’s it.
@Investor1546 and deservedly so
Investor1546 profile picture
@perowan why though? It makes no sense that Terrascend is trading at 10 PS and Cresco Labs is like 5-6 PS. I am easily buying Cresco Labs over Terrascend all day long.
Maintains Cantor Fitzgerald: to Overweight 3/24/2021
Maintains Needham: to Buy 3/24/2021
Initiated Cantor Fitzgerald: to Overweight 1/8/2021
Jason Wild is the brains behind TRSSF, not Ackerman.
I guess CGC owns 21% of TRSSF for no good reason.
Look for CGC to buy them out completely once they legally are allowed to.
This MSO is a screaming BUY, IMO.
You obviously have no understanding of the space or, Jason Wild.
@brujay1 Jason, is that you? ;)
@Spiritus fermenti Ha. Check him out. he's a very smart guy and well respected in the industry.
Gregory Silverstein profile picture
Legit joke piece
Investor1546 profile picture
@Gregory Silverstein Terrascend is richly valued compared to other MSOs. What else do you want? The numbers are the numbers. Yes maybe CGC will buy them out but I would argue most of the large MSOs will likely be bought out at some point. Analysts don’t show a ton of upside and that is because of the valuation. Why am I to buy Terrascend at 10x sales when I could get other MSOs at 4-7 PS?
@Investor1546 Growth. That factors into it
Investor1546 profile picture
@blome yeah but the growth is priced in and some. If you want growth at a much cheaper multiple buy Cresco Labs. PS is half of Terrascend and Illinois is looking tasty, they just posted 109 million for rec sales in March representing 36% month over month. Why does it Terrascend deserve the highest (or one of highest) multiples in the industry?
Gregory Silverstein profile picture
Out of your mind
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