Marijuana News Today: Why CTST Stock Has a Bright Future & Why TLRY Stock Will Struggle

Marijuana News Today
iStock.com/OlegMalyshev

Marijuana News Today

The marijuana news today is busy with activity following the release of several major quarterly financial reports. Since the earnings reports are currently sucking up all the oxygen in the market, we’re going to do something a little different today.

Instead of the usual focus, I’ll examine the fates and fortunes of two marijuana companies that released their quarterly reports this week: Tilray Inc (NASDAQ:TLRY) and CannTrust Holdings Inc (NYSE:CTST).

Chart courtesy of StockCharts.com

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CTST Stock

A marijuana penny stock of note, we’ve covered CannTrust stock over the past few months as its last two quarterly reports have had vastly different impacts on share prices.

Its most recent quarterly report, however, came in pretty strong: CannTrust recorded quarterly revenue of CA$16.9 million, a 115% year-over-year increase. Some 33% of its revenue was generated through the recreational marijuana channel and 67% was generated through the medical marijuana channel. (Source: “CannTrust Reports Financial Results for Q1 2019,” Cision, May 14, 2019.)

The company also increased its total active patient count to 68,000 as of March 31, a 70% year-over-year increase.

CannTrust’s harvested production increased by more than 400% versus its Q1 2018 production to over 9,400 kilograms (over 20,000 pounds), and by 96% versus its Q4 2018 production.

The company also sold over 3,000 kilograms (6,600 pounds) of dried cannabis equivalent, a nearly 200% increase over the prior year, at an average net price of CA$5.47 per gram.

Cost of sales per gram sold and cash cost per gram sold were CA$3.03 and CA$2.77, respectively, compared to CA$3.08 and CA$2.94 in the previous quarter.

With the quarterly report boost, CTST stock has been able to buck the otherwise downward trending movement of the marijuana market writ large. Instead, this marijuana penny stock is seeing small gains instead of the losses that many other stocks have fallen victim to this week.

What makes CannTrust stock even better is that it is still a marijuana penny stock, meaning that big movement could still be in the cards. After all, penny stocks are valued precisely for that quality: their ability to rise high in an instant.

Looking at the stock’s stagnant progress over the past year—when many others have seen intense growth—there are reservations. What, exactly, is going to motivate a breakout for CTST stock? What will it take to juice share prices?

Obviously, an acquisition or partnership would help boost shares, but that is hard to predict and hardly a sound way to plan an investment strategy.

Conversely, the stock’s lack of growth can be, in a way, positive. The company has yet to experience a massive rush, which means that share prices are still relatively fairly valued (something that Tilray struggles with). That means that the shares have the ability to soar, but it will take the right circumstances.

I’m not entirely sold on CannTrust Holdings Inc, but I am certainly intrigued. Its most recent earnings report was a good jolt for its share prices, giving the company a much-needed boost.

If you’re looking for a more volatile—higher-risk but potentially high-reward—pick, then CannTrust stock could be for you.

TLRY Stock

Now on to Tilray Inc, an entirely different beast from CannTrust. While the penny stock CTST is flat, waiting for a big event to help spur share-price growth, TLRY stock is in the opposite position.

Tilray, you’ll remember, set the marijuana world afire when it first hit the public markets on the Nasdaq. The first pure-play marijuana stock to make an initial public offering on that major U.S. exchange was hugely successful—until it wasn’t.

After a few weeks of absurd growth, Tilray stock has been slowly but steadily descending from its high point in fall 2018. And, frankly, it still has a ways yet to fall.

I have written several times about how the company’s next quarterly report would be a huge determinant of its fate, and the numbers came back pretty lukewarm.

Tilray posted revenue increases of 195% from last year to $23.0 million, motivated by sales in the Canadian market. A 5.7% fall in the average price per kilogram sold, however, meant that Tilray still posted a loss of $0.27 per share, missing Wall Street forecasts by a penny. (Source: “Tilray Shares Jump After Q1 Revenue Beat; Aurora Slides as Sales Miss Forecasts,” TheStreet, May 14, 2019.)

Tilray CEO Brendan Kennedy said all the right things, claiming that the company was looking toward global partnerships in the future to help juice share prices.

“We’ve been inundated with contacts from Fortune 500 companies who are interested in exploring partnerships with Tilray,” said Kennedy. “We’re also starting to have conversations with U.S. retailers who are interested in carrying CBD product in the second half of this year.” (Source: Ibid.)

But all that isn’t enough to help pull the company from its funk. Its shares were down three percent just a day after the report was released.

The problem, then, is that Tilray is still too highly valued. Until it falls to a level that investors deem appropriate, these quarterly reports and other bits of good news won’t be able to stem that downhill-flow.

Right now, I believe that Tilray stock’s next big threshold is $40.00. At that price, it might finally reach an equilibrium, but even then, I’m still not sure. As such, I’d be wary of this stock.

Analyst Take

In the marijuana news today we have two similar stories with two very different results. Both CannTrust and Tilray had good quarterly reports, but both companies are not sharing the same fate.

While CTST stock has risen, TLRY stock only enjoyed a brief bump before falling immediately.

The fact is, while CannTrust is a risky but potential-filled stock, Tilray has been trending downward for some time now.

Both stocks could turn into strong long-term opportunities, but both are far from perfect—strong quarterly reports or no.

But regardless of which of the two stocks you choose, remember to do your research first. A company’s fortunes can change in the blink of an eye.