TerrAscend Corp. (CSE:TER, OTCQX:TRSSF) has retained a ‘Buy’ rating but a reduced price target of C$2.85 from Canaccord Genuity's analysts following the release of fourth-quarter results ending December 31, 2022.
For the quarter, the analysts noted that TerrAscend reported net revenues of US$69 million, a 4.2% increase from the previous quarter and slightly ahead of their forecast of US$68.5 million for the period.
“Increased top-line progression vs. Q3/22 was supported by continued expansion in New Jersey’s adult-use market, a slight rebound in Pennsylvania's wholesale market, and the first full period of contribution from its acquisition of Michigan-based Pinnacle in Q3,” the analyst wrote in a client note.
“Below the top line, adj. gross margin took a slight step back, coming in at 45.3% (vs. 46.1% in the prior quarter) as a result of ramp-up costs in its Maryland cultivation/ production site in addition to further price compression in Michigan.”
However, with relatively measured operating expenditure, they said the company was able to report 4Q adjusted underlying earnings (EBITDA) of US$12.2 million, representing a margin of about 17.7%, which was up 80 basis points quarter-over-quarter.
It also ended 2022 with US$26 million of unrestricted cash on hand and a positive free cash flow from operations run-rate of more than US$30 million.
The analysts said they value TerrAscend using a sum-of-the-parts analysis, utilizing a discounted cash flow with discount rates ranging from 13% to 18%.
“After updating our model for the quarter and lowering our near-term forecasts, we are trimming our PT to C$2.85, from C$3, and we reiterate our BUY recommendation,” the analysts said.
TerrAscend's shares were down 4.4% at C$1.94 in early Monday afternoon trade.
Contact the author at stephen.gunnion@proactiveinvestors.com