Cantor cuts TerrAscend to neutral on model update post Q2 miss


Cantor Fitzgerald downgraded TerrAscend (OTCQX:TRSSF) to “neutral” from “overweight” and reduced its price target to $2.85 from $6.45 on lower estimates and sectoral derating. The stock closed at $2.40 on Aug. 11.

TerrAscend is a leading North American cannabis operator with vertically integrated operations in Pennsylvania, New Jersey, Michigan and California, licensed cultivation and processing operations in Maryland, and licensed production in Canada.

Analyst Pablo Zuanic writes that his downgrade reflects valuation, the second quarter miss, rich forward estimates, and a stretched balance sheet.

However, he said the company should benefit from expanded services by Lodi stores in New Jersey and retail/wholesale growth in the state; from the Gage expansion in Michigan; with recreational optionality in Pennsylvania and Maryland, as do several other multi-state operators (MSO). “But we think these benefits are being over estimated by consensus,” he added.

“We realize at this phase in the cycle, the call on MSO stocks is more macro-based (especially on reform expectations), but we think there are more attractive options in the MSO group to benefit from a likely year-end rally in the space,” Mr. Zuanic said.