Calling it the first North American cannabis company, Clarus Securities has initiated coverage of TerrAscend Corp. (TerrAscend Corp. Stock Quote, Chart CSE:TER) on Tuesday with a “Speculative Buy” rating and $12.50 target price.

TerrAscend owns a 67,000 square foot cultivation and production facility in Mississauga, Ontario, and has wholesale shipment contracts into five Canadian provinces. Last year, Canopy Growth, Canopy Rivers and JW Asset Management together invested $52.5 million in an equity recap to own collectively a 60 per cent stake in the company, with the express aim at building out the company into the United States.

Last month, TerrAscend announced a $157-million deal to acquire California-based Apothecarium, which includes three retail shops in San Francisco, operations in Nevada and the Valhalla Confections brand of edibles.

“TerrAscend Corp is one of the first Canadian cannabis licensed producers to leverage its experience and access to capital to aggressively expand into the US. We believe the company’s cannabis and hemp CBD platforms position it to be an industry leader on both sides of the border,” says Noel Atkinson, analyst for Clarus Securities.

“The acquisition of hemp CBD company Arise Bioscience and pending purchase of The Apothecarium dispensary chain will provide at least US$60 million of annual sales. This should catapult TerrAscend to being a top ten cannabis stock by US quarterly revenue,” he says.

The analyst points out that TerrAscend recently won one of six highly coveted vertically-integrated medical cannabis licenses in the state of New Jersey and scored the highest among 146 applicants, which Atkinson says bodes well for future de novo initiatives.

Atkinson sees TER generating 2019 revenue of $96.7 million and Adjusted EBITDA of $4.4 million, 2020 revenue of $340.7 million and Adjusted EBITDA of $90.2 million and 2021 revenue of $515.8 million and Adj. EBITDA of $146.1 million.

The analyst gives a multiple of 17x his 2021 EV/Adjusted EBITDA estimate, discounted one year at 15 per cent, to arrive at his price target of C$12.50 per share, which represents a projected 12-month return of 70.8 per cent at the time of publication.