Terra Tech Corp (OTCMKTS:TRTC) has been running.
The company has experienced a share price surge like no other in its history this past month with their share price rising from $.20 to highs of up to $.578, a more than 280% share price surge. This was also a jump from their share price during our last review which stood at $.213. They are currently trading at $.283 after Jeff Sessions spooked the market.
The surge has further been driven by the high turnover in the shares traded which hit the roof during the month to close at a near 80 million shares, the highest since inception.
The above price action can be seen below:
TRTC Daily Chart
We took time to assess the rationale behind investors giving the high valuation to Terra Tech Corp and name thing kept popping up: California. We, therefore, decided to evaluate the company from the point of view of how much they seek to reap from their stay within this market.
The report gives a brief on the above.
Terra Tech: Background
Terra Tech Corp is a significant player in the marijuana industry.
The company which was founded in 2008 and has its headquarters in Irvine, California has formed and acquired many subsidiaries who have enabled it to grow to the giant it currently is.
Previously, the company was focused on medical marijuana cultivation. However, with the changes in legislation within California, Terra Tech is now adapting and changing their strategy to ensure they serve the much more significant market of recreational cannabis users.
The company currently has over 154 employees and over $372 million in market capitalization.
The California-Driven Highs
On January 1st, 2018, California legalized the use of recreational marijuana within the state. This arose courtesy of a 2016 ballot initiative that saw 57% of people vote for the full legalization of marijuana across the state.
The state has been seen by businesses as a significant market for marijuana. It hosts over 39 million people and receives nearly five times that number of tourists annually. As such, it boasts a $2.5 trillion wealth base making it the world’s sixth largest economy.
With such pleasant demographics and wealth statistics, registered cannabis companies (which according to the state are currently about 400) are fighting to ensure they have established themselves within this space.
Terra Tech Corp has not been left behind.
On 1st January, Terra Tech announced that they had received a temporary authorization to distribute and retail cannabis from the state of California. They further stated that they expected to obtain approvals to cultivate and manufacture marijuana for California’s adult-use and medical markets.
The company which has already established its networks within the state through their subsidiary, Blum, is working at harnessing the already established name of Blum to grow their distribution network. Blum already has two retail dispensaries in Oakland and Santa Ana, both which previously served the medical cannabis segment of their clients. However, they realized that these would not meet the high demand arising from recreational users. As such, they had been constructing a retail outlet at San Leandro which was to be opened in early 2018.
With this being completed, TRTC decided to boost their production capacity through the expansion of their renown ‘Craft Cultivation’ model.
The model which serves as a ‘yield increasing’ method, one through which the company can ensure that they never fail to supply their buyers with the product they all so demand.
As such, they have hired two craft cultivators based on Honeydew and Salinas. The two are supposed to ramp the production of cannabis. Given that Blum is specialized in premium cannabis, the producers will also have to ensure that the quality of the product is up to par with the market’s expectations. As such, the products will be rigorously tested by TRTC to ensure that they meet every prerequisite set by the company before heading to the shelves.
The legalization has been welcomed by the management of Terra Tech with their CEO, Derek Peterson, assuring customers that they are ready for this new phase. In his speech, he was quoted saying:
“…This adult-use license allows us to significantly expand our potential customer base in California beyond the medical market… Terra Tech is one of only a handful of companies that has been issued this adult-use license in time for the Jan 1st start date. We believe this first mover advantage will enable us to grow our brand and gain traction with new… Over the past several months we have worked diligently to expand both our retail presence and our cultivation facilities to prepare us for this exciting opportunity.”
Source:
Upon this backdrop, the company expects that their standing within the Californian cannabis market will continue to strengthen and that they will continue to derive the benefits from the sale of cannabis to this market.
Furthermore, with the structures already in place, is working at being the one stop shop for recreational cannabis users within California.
Financials
In the third quarter of 2017, 3Q2017, the company made over $10 million in revenues, up from the $7.8 million earned in the previous quarter. The near 30% rise was attributable to the greater marketing of their products, a factor which partly led to a loss position of $3.9 million. This, however, was a decrease from their previous loss of $4.5 million, alluding to the fact that TRTC was managing their costs in a much better manner.
The company expects the current development within California to be a boost to their revenue streams. Therefore, they are working towards being both profitable and cash flow positive shortly.
Conclusion
TRTC is a growing company with a strong market backing them. With their current growth trajectory already being steep, we expect that the development in California will only go to boost their position.
Regarding Mr. Sessions, he has to answer to his boss President Trump, who said that marijuana is a states’ rights issue. Trump also doesn’t want to alienate his base, which is pro-marijuana. With several Senators and Congressman up in arms over Sessions’ change, we expect the political backlash to isolate the Attorney General.
As such, we remain bullish about the stock. Investors should look at the selloff as a buying opportunity.
ByJim BloomPosted on January 5, 2018
AI
