About ten months ago, I wrote about Terra Tech. What has changed since then? Revenue is better, margins are better, and marijuana politics are mixed.
Fundamentals
Annual
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|---|---|
| Revenue | - | $552,579 | $2.13M | $7.09M | $9.98M | $25.33M |
| Gross Income | - | $100,866 | $88,918 | $152,992 | $1.02M | $2.57M |
| Gross Margin | - | 18.25% | 4.17% | 2.16% | 10.22% | 10.15% |
| SG & A | $7,497 | $1.07M | $3.58M | $18.3M | $9.83M | $20.72M |
| Net Income | -$28,985 | -$5.84M | -$6.15M | -$21.89M | -$9.23M | -$26.92M |
| Net Margin | - | -1057% | -289% | -309% | -92% | -106% |
Revenues have been increasing significantly. 2016 saw an almost 200% increase in the top line. While I am not too concerned about margins at the moment, considering just how much is being spent on growing the business, I did want to include gross margin and net margin calculations in this update. Obviously net margin is still incredibly negative, but in the last two years, it has settled down to about -100% which is a heck of a lot better than the first four years. For gross margin, 10% is still quite low. I would like to see gross margin increase to about 20 – 30% but at least it is in the double digits.
Quarterly
| 3/31/2016 | 6/30/2016 | 9/30/2016 | 12/31/2016 | 3/31/2017 | 6/30/2017 | 9/30/2017 | |
|---|---|---|---|---|---|---|---|
| Revenue | $1.55M | $9.7M | $6.95M | $7.13M | $6.82M | $7.84M | $10.12M |
| Gross Income | $133,974 | $1.26M | $1.32M | -$530,621 | $359,063 | $1.51M | $2.33M |
| SG & A | $2.05M | $5.08M | $6.01M | $7.2M | $6.39M | $6.03M | $6.24M |
| Net Income | -$4.13M | -$4.93M | -$5.59M | -$12.27M | -$10.11M | -$453,769 | -$7.79M |
There’s a fairly straightforward positive trend in the growth of revenue. Q4 2017 was a very nice sales quarter. However, I am waiting to see how new legalization trends affect Q1 2018 and how federal crackdowns might affect sales trends.
Stock Movement
Terra Tech’s stock experienced a significant amount of volatility towards the end of 2016 into 2017, which also caused a spike in trading volume, but has settled down to the low 30 cent range for now. The stock is currently trading above its 50, 100, and 150 SMA, however, I am not going to make any guesses on its short term price movement.
Politics
Jeff Sessions has been trying to double down on his threat to enforce federal anti-marijuana laws. However, even as he issues his warnings, more states are working towards legalization. California’s recreational marijuana laws are now going into effect. New Jersey is working to quickly implement recreational weed legislation. With states surrounding New York moving to legalize, it seems like it is only a matter of time before New York follows. With so many states legalizing, and with federal laws threatening the people of those states and marijuana revenues in those states, there will be more and more impetus for congress to act to fully legalize marijuana on the federal level. This situation is doubly true because of the threat from Sessions. That is why I still see his threat as being bullish for marijuana companies, at least in the long run.
Future Expectations
A lot will depend on exactly what Sessions and congress does. The non-cannabis area of Terra Tech may help buffer them from the full effects of the Jeff Sessions threat. In terms of revenue, since they now have a temporary license to sell to adults in CA, I do expect the top line to expand even further in Q1 of 2018. They are however still pushing to expand and that means a lot of their revenue will go back into growing the company. TRTC is not currently interested in profits. It is interested in growth.
Related Industries
Terra Tech sees itself popping up in the news in some rather “odd” places. In one article, it was mentioned alongside Taco Bell. However, that makes sense. “Munchies” may very well fuel a boom in fast food and fast casual restaurants, the latter being something I am very interested in watching. However, even among traditional fast food companies, we are seeing an effect from marijuana legalization. Jack in the Box has said that it is planning to release munchie themed meals. Even if other larger companies do not follow along, the increased in sales from cravings may help boost sales.
Disclaimer
And for the usual disclaimer, I do own shares of TRTC and some other marijuana stocks. These stocks are penny stocks in a high risk sector and therefore are all buyer beware. Do you own research, make sure you only risk what you’re willing to lose.