Terra Tech Corp (OTCMKTS:TRTC) just reported its Q1 results, which presents us with a perfect opportunity to update our take on this long-term marijuana lottery pick in lots of portfolios. A couple months ago, we noted the huge importance of the $0.22-0.23 area for this stock, suggesting that it had to hold that zone. Well, as you can plainly see, support broke violently in April and has not been recovered. Hence, whatever else we discuss in today’s analysis, one must digest it in the context of that weak action.
Turning to the quarter, TRTC is expanding into the Nevada market which is having a temporary impact on the bottom line, but the 340% revenue growth is encouraging. Also the ability to get licenses in Nevada by July 1 has management notably excited about its 2H17 growth prospects. As usual, the story is still told on the top line: “Total first quarter revenues were $6.8 million, representing a 340% increase over the prior year period and we are on track to meet our revenue guidance of $38 – $40 million for 2017.”
Terra Tech Corp (OTCMKTS:TRTC) has positioned itself in the cannabis space as a company that engages in the design, marketing, and sale of hydroponic equipment with proprietary technology to create sustainable solutions for the cultivation of indoor agriculture in Newport Beach and Irvine, California.
It operates through two segments, Hydroponic Produce and Cannabis Products. The company offers environmental controllers and timers; ballasts; bulbs; reflectors; nutrients; and portable hydroponic trailers and The Big Bud and Little Bud, which are custom fabricated proprietary cultivation systems for horticulture enthusiasts, local urban farmers, and greenhouse growers
Terra Tech Corp also operates as a retail seller of hydroponic produce, herbs, and floral products, which are distributed in the Midwest and the Northeast United States; and produces and sells a line of cannabis flowers and cigarettes, as well as a line of cannabis pure concentrates, including oils, waxes, shatters, and clears to dispensaries in California.
TRTC operates through multiple subsidiary businesses, including Blum, IVXX Inc., Edible Gardens, MediFarm LLC and GrowOp Technology.
Blum’s retail medical cannabis facilities focus on providing the highest quality medical cannabis to patients who are looking for alternative treatments for their chronic medical conditions. Blum offers a broad selection of medical cannabis products including; flowers, concentrates and edibles through its Oakland, CA and multiple Nevada locations.
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Management is focusing a lot on the Nevada segment as the driver of future results.
“This quarter saw the opening of our fourth Nevada-based Blüm dispensary, located in Reno. This location benefits from limited local competition and we are pleased to record excellent initial sales from Blüm, Reno, which was our best-performing dispensary in the quarter. We consider Nevada to be a major growth opportunity for the Company and are proud to have established a strong presence in the State of Nevada, across both Reno and Las Vegas. This week, the Nevada Tax Commission adopted temporary regulations to allow the state to issue recreational marijuana licenses as early as July 1, which should pave the wave for Terra Tech to break into the recreational market in the second half of 2017. This is a source of great excitement for us.”
As far as the bottom line, the company notes that gross profits have been negatively impacted by spending on the company’s growth initiatives. Gross profits for the three months ended March 31, 2017 were approximately $359,000, an increase of approximately $225,000 compared with the prior year period. Gross margin for the first quarter of 2017 amounted to approximately 5%, compared to a gross margin of approximately 9% for the first quarter of 2016. Margins were impacted by increased spending on the development of new forms of extracted cannabis products and the refinement of Terra Tech’s propriety recipe of extraction.
The net result of that combination of forces was predictably negative for the bottom line. For the quarter ended March 31, the total net loss came in at approximately $10.1 million, or $0.02 per share, compared to a loss of approximately $4.1 million, or $0.01 per share, for the first quarter of 2016. That’s the bottom line reality.
However, we would note that this can be framed as investment in future growth, and the balance sheet is in great shape.
Stockholders’ equity for the first quarter of 2017 amounted to approximately $49.8 million for TRTC, compared to approximately $52.2 million as of December 31, 2016. Short-term debt as of March 31, 2017 amounted to approximately $505,000, compared with approximately $564,000 as of December 31, 2016. Long term debt increased from $1.4 million to $1.7 million during the first three months of 2017, due to additional borrowings used for working capital and capital expenditures. For continuing coverage on shares of $TRTC stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!