There has been a lot happening in the cannabis space over the past week: Canada legalized the recreational use of the drug federally and the sales from the first day turned out to be great. However, this same period has seen some cannabis stocks plummet in price, bringing to question the reason for this. Generally, share prices are associated with the expected future gains from a stock. For shares to plummet, the expected future gains are either lower than expected or the expected future losses are expected to rise.

In this particular yet peculiar case, gains from cannabis within Canada were expected to be massive. The country’s population is high (over 36 million people) and their per capita GDP stands at over $45,000, a significant figure which postulates a people with high purchasing power. With the above two figures in mind, it becomes clear why the country’s cannabis sector had been valued at over $2 billion and why market players were rushing to get their share of the record highs which were being set by already established companies.

During this entire period, however, Terra Tech Corp (OTCMKTS:TRTC) has been going through a bear run. Its share price has declined by highs of over $9 at the beginning of 2018 to their lows of below $2 as at the end of September. This is shown in the chart below:

However, as at the end of October, the firm’s share turnover jumped drastically to see their share price rise marginally. Furthermore, a similar scenario has been witnessed recently during the legalization of cannabis in Canada whereby the firm’s share turnover also increased but by half the margin. The result of both scenarios was a rise in the share price.

As a result of all the above, we postulated that TRTC is currently an undervalued stock which will soon be rising, riding especially on the continued rise in the demand and expansion of the market for cannabis and its associated products as well as the firm’s own expansion into different business segments. This piece gives a synopsis of our analysis.

TRTC: An overview

Terra Tech Corp was founded back in 2008 and headquartered in Irvine, California. Since then, their operations have primarily been concentrated within the state of Nevada.

The firm, through its subsidiaries, operates within the healthcare sector, specifically within the cannabis segment. Here, they seek to provide the highest quality of medical cannabis to their patients – who are usually under treatment for chronic medical conditions. Furthermore, some of their subsidiaries also take part in the cultivation of cannabis with others currently working towards obtaining permits to venture into this space.

The firm is working towards ensuring they are both in the primary cultivation as well as in the value added segment so as to cut across the cannabis value chain. Through this, they expect to tap into the revenues and cash flows associated with the entire line, boosting their shareholder value in the process.

Recent developments

The key developments pertaining TRTC have involved their bid to venture into the Nevada region and expand their operations as discussed below.

Growth within Nevada

The vertically integrated cannabis company has recently purchased a 4,541+ square feet retail building located in downtown Las Vegas. The property will ensure the firm is open to the over 14 million tourists who visit the region, allowing for a higher revenue receipt in the process.

Throughout this period, the outlook of TRTC has been to venture into regions with high tourist inflows. With tourists providing an additional market to players, TRTC hopes to tap into this market and ensure that they obtain the highest revenue, especially within the Nevada region. Their specialization within this region coupled with a strong brand acts as a way for them to grow their business and eventually the shareholder value.

Property sale

As previously stated, the firm has been seeking to tap into the tourist regions of Nevada. As a result, TRTC has begun the sale of its properties which do not meet this criterion. This started earlier this week with the sale of its real estate property located at 1921 Western Avenue in Las Vegas to Exhale Brands Nevada. This transaction is expected to see the firm receive a consideration of $6.25 million.

TRTC stated that the proceeds would see them seek additional property within regions which have better tourist activity thus better prospects for revenue generation. With Nevada having sold over $530 million in cannabis over the past twelve months, the firm seeks to tap into this and increase their market share and overall revenue base. Furthermore, the strategy is coupled with their current need to grow into the retail space, allowing them to venture into the entire value chain.

The above was underscored by the firm’s CEO, Derek Peterson who stated:

“We have therefore submitted two retail dispensary permit applications with the State of Nevada. This retail strategy, coupled with our ramp in cultivation and production operations, is expected to drive revenue growth in Nevada.”

Conclusion

All in all, it seems that TRTC is focused on the Nevada region. Their role in the state’s retail space seems to have been solidified by their already strong brand. However, with most cannabis players growing into other parts of the world, the growth of Terra Tech Corp remains capped at $530 million. The firm is expected to grow, however, for their valuation to compete favorably with other players, resources need to be placed to ensure their growth both within the United States and other parts of the world. Despite this, their place in Nevada is secured and their growth both in terms of revenue and market share will soon be visible to investors.