Disappointing earnings results is the latest headwind that threatens to plunge Terra Tech Corp (OTCMKTS:TRTC) to all-time lows. The stock has taken a significant hit having lost more than 80% in market value. Investors’ confidence in the stock has taken a significant amidst concerns about widening net loss. However, the stock remains an interesting play given the long-term investments made so far.
Terra Tech Price Analysis
While the broader cannabis sector has been under pressure, Terra Tech has continued to underperform even on the sector turning bullish in recent weeks. After plunging below the $1 a share psychological level, the stock looks set to plunge to the $0.40 level, the next substantial support level.
A sell-off followed by a close below the $0.40 mark would accelerate the sell-off wave in continuation of the long-term downtrend. For the stock to be considered a bounce-back play, it first needs to rise and stabilize above the $1.20 mark, a key resistance level.
What Does Terra Tech Corp
Terra Tech is a vertically integrated cannabis-focused company. The company operates under two segments of herbs & produce and Cannabis dispensaries, cultivation and production. The company also operates under multiple subsidiaries of the likes of Blum IVXX, Edible Garden and MediFarm LLC
Disappointing Earnings Results
Terra Tech Corp finds itself on the receiving end of surging short selling pressure on reporting disappointing Q3 financial results. Revenues in the quarter slumped to $7.1 million from $10.1 million reported last year.
The company attributes the decline to lower IVXX revenues, due to the relocation of production facilities. However, the company expects the dip to be a one-time occurrence as the relocation to upgraded facilities will facilitate increased production.
A wider than expected net loss spooked the markets and consequently fuelled a sell-off wave. Net loss in the quarter nearly doubled on rising to -$13.7 million compared to -$7.8 million reported year earlier.
Organic Growth Pursuit
In defense of the disappointing earnings results, Chief executive Officer Derek Peterson insists they achieved significant milestones in the quarter. The Chief executive officer also insists they have taken the necessary steps to streamline operations at Blum retail dispensaries poised to accelerate sales growth.
“We invested in our organic growth by working toward upgrading our IVXX® production facilities to optimize efficiency and output at our wholesale business. While this transition impacted revenues in the short term, these steps will allow us to increase production and achieve greater distribution throughout California, building a more defensible and scalable long-term business model,” said Mr. Peterson.
In addition to pursuing growth opportunities in North America, Terra Tech is also focused on international expansion. The management remains committed to advancing the company’s business in a bid to become a market leader in the booming legal cannabis industry. As part of the expansion drive, the company is targeting potential merger and acquisition opportunities that will bring scale and product diversification to the business.
In line with the push for organic growth, Terra Tech has already signed a binding letter to merge with Golden Leaf Holdings. Under the terms of the deal, the resultant company will continue operating as a wholly-owned subsidiary of Terra Tech.
The merger should allow Terra Tech to expand and strengthen its footprint in the U.S. For starters, the combined company will have 41 permits in key cannabis markets of California, Nevada, and Oregon.
“We are planning to merge with Golden Leaf’s operations because its seed-to-sale business model is complementary to ours, encompassing both the Oregon and Canadian market which represent new markets for us, and touching Nevada where we are focused on gaining market share,” said Mr. Peterson.
In addition to merging with Golden Leaf Holdings. Terra Tech Corp has also confirmed plans to expand its cannabis dispensary footprint with the acquisition of a Las Vegas property. The property up for purchase is located at 121 North Fourth Street. The acquisition is part of the company’s push to expand its footprint in Nevada.
Terra Tech has paid a hefty price for reporting disappointing earnings results in 2018. A wider than expected net loss has all but continued to spook investors. However, behind the earnings results, the company has shown its commitment to expanding its footprint and pursuing organic growth.
Aggressive investments might have affected the company in the short term. However, the company remains focused on the future, given the investments made so far. That said the stock looks like an ideal long-term play especially at current lows.
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Disclosure: We have no position in TRTC and have not been compensated for this article.