Terra Tech Corp (OTCMKTS:TRTC) Goes Further Up
Terra Tech Corp (OTCMKTS:TRTC) published the report covering the third quarter of 2013 on November 19. It showed us that the company has managed to register a year-over-year increase in revenues of around 635%. It also revealed that TRTC nearly managed to break even during the reported period. With this in mind, many people expected to see some strong movements from the stock during the days after the issuance of the report.
That didn’t really happened. TRTC did manage a positive session on November 19, but it was followed by two days in the red which basically obliterated any potential gains.
On December 17, the company issued its latest press release according to which their line of fresh produce is now available at the Fairway Markets chain of retail stores. Once again, investors didn’t really react.
The new year came, however, and TRTC started moving. As you probably know, Colorado allowed the legal sales of recreational marijuana on January 1 and this propelled virtually all companies that are (or want to be) involved in the pot industry on a winning spree. TRTC is running with the pack and although it experienced a few corrections, it has managed to double its market cap since the beginning of the new year.
At the end of last week, we saw President Obama’s opinions on the use of cannabis and we also heard rumors about the removal of the banking restrictions currently imposed on marijuana businesses. This resulted in Friday’s surge of 17.5% which, in turn, led to the current price of $0.376 per share.
Message boards are buzzing and we can see that most investors believe that this is just the beginning. Is this really the case though?
We’re not so sure. The problem is, we’ve been covering TRTC for quite some time and we know for a fact that there has never been a shortage of people who truly believe in the company. Yet, the stock performance has left a lot to be desired. Indeed, the latest report shows that the management team has made some steps in the right direction, but unfortunately, there’s still a long way to go.
The 10-Q reveals that at the end of the third quarter, TRTC had just $40 thousand in cash and around $3 million in working capital deficit. It also shows us that despite the respectable revenues, the gross margin stands at just 0.46% while the small net loss is due to gain on fair market valuation of derivatives.
This means that we’ve no idea how close TRTC is to achieving profitability and this, in turn, brings the problem of dilution. Between June 30 and October 28, the company issued nearly 35 million shares of common stock bringing the outstanding number to over 123 million. Sooner or later, the hype around the marijuana industry will subside and if the stock issuance continues, the dilution could start taking its toll.
On the bright side, TRTC isn’t (currently) targeted by the paid promoters (which is more than can be said about Konared Corp (OTCBB:KRED) and Centor Energy Inc (OTCBB:CNTO)) and this might just lower the risks of a sudden and violent correction. That said, the ticker remains volatile and careful evaluation of all the potential dangers is, as always, absolutely crucial.
