Tripling of Tilray Stock Could Be Just the Beginning

Tripling of Tilray Stock Could Be Just the Beginning

TLRY Stock Has High Potential

Last year was terrible for cannabis stocks. That was despite President Joe Biden saying he would pardon all federal offenses of criminal marijuana possession and ask the Department of Health and Human Services and Attorney General Merrick Garland to “expeditiously” review how cannabis is scheduled under federal law.

With federal U.S. marijuana legalization an eventual given, it might be time for investors to look at pot stocks that are poised for long-term gains. One cannabis stock with high potential is Tilray Inc (NASDAQ:TLRY), also known as Tilray Brands, Inc.

As of this writing, Tilray stock is down by:

  • 20% over the last month
  • 19% over the last six months
  • 27% year-over-year

That’s significantly worse than the broader stock market, but the outlook for TLRY stock is solid. Analysts have provided a 12-month share-price target in the range of $4.42 to $9.00, which points to upside in the range of 58% to 222%.

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Chart courtesy of StockCharts.com

Why the optimism?

In addition to having the No. 1 share of the marijuana market in Canada, Tilray Inc continues to expand its U.S. business. It’s also well positioned to capitalize on the growing legalization of cannabis in Europe.

Tilray has been taking steps to become leaner, manage its operating cash flow, make accretive acquisitions, and become sustainably profitable. Despite economic headwinds, the company is close to achieving its increased annualized cost savings target of $130.0 million.

All this should help Tilray Inc be a more efficient and dynamic business that realizes tangible benefits as the market improves.

About Tilray Inc

Tilray is a leading global marijuana lifestyle and consumer packaged goods (CPG) company with operations in Canada, the U.S., Latin America, Europe, Africa, Australia, and New Zealand. (Source: “Corporate Profile,” Tilray Inc, last accessed January 16, 2023.)

Tilray was one of the first companies to be licensed to produce medical cannabis in Canada. It was also the first company to legally export medical cannabis products from North America to Europe, Australia, and New Zealand.

Tilray Latin America imports “Tilray”-branded medical cannabis products into Chile. This division of the company will act as a hub to distribute Tilray products throughout Latin America.

Tilray Inc has been tagged as the Canadian marijuana producer best positioned for recreational pot sales in Germany. The country is expected to legalize recreational cannabis by 2024.

Tilray has been operating in Germany’s medical cannabis sector for four years, achieving a market-leading share of 20%. There are only three legal marijuana grow facilities operating in Germany, and Tilray owns one of them. (Source: “Tilray Brands’ First Quarter Fiscal Year 2023 Performance Affirms Global Cannabis Leadership,” Tilray Inc, October 7, 2022.)

Tilray operates through four business segments: cannabis, distribution, beverage alcohol, and wellness.

Tilray Inc’s cannabis segment cultivates, produces, distributes, and sells medical and recreational marijuana products. Its distribution segment purchases and resells pharmaceutical and wellness products. The beverage alcohol segment produces, markets, and sells alcohol. The wellness segment produces hemp-based foods and wellness products.

Brewery Acquisition & Other Recent Developments

Tilray Inc has been on an acquisition tear, expanding its CPG and craft brewing portfolio. In the U.S., its businesses include Breckenridge Distillery; Manitoba Harvest Hemp Foods, a pioneer in hemp, cannabidiol (CBD), and wellness products; and SweetWater Brewing Company, Inc., the 10th-largest craft brewer in the country.

In November 2022, Tilray expanded its U.S. footprint with its acquisition of Montauk Brewing Co., the No. 1 and fastest-growing craft brewer in Metro New York. (Source: “Tilray Brands Acquires Montauk Brewing Company,” Tilray Inc, November 7, 2022.)

Montauk’s products are distributed at more than 6,400 locations, including “7-Eleven,” “Costco,” “Target,” Trader Joe’s,” “Walmart,” and “Whole Foods.” The acquisition is expected to be immediately accretive to Tilray’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Tilray Inc intends to leverage Montauk’s northeast influence and SweetWater’s nationwide infrastructure to significantly expand its distribution network and increase the profits of its beverage alcohol segment.

This is part of Tilray Inc’s strategy to leverage its expanding portfolio of U.S. CPG brands and ultimately launch tetrahydrocannabinol (THC)-based products in the U.S. upon federal legalization of recreational marijuana.

In addition to the Montauk acquisition, Tilray Inc has announced several strategic growth drivers over the past few months:

  • September 2022: Tilray’s subsidiary Breckenridge Distillery announced a nationwide alignment and renewed distribution agreement with Republic National Distributing Company
  • September 2022: Tilray Medical received approval to extend its market authorization in Italy
  • September 2022: Tilray’s subsidiary SweetWater unveiled new fall craft beers
  • October 2022: Tilray Medical relaunched its cannabis oral solution in Ireland
  • October 2022: Tilray’s subsidiary Green Flash Brewing Co. launched new beers across the U.S. 
  • November 2022: Tilray Inc and Charlotte’s Web Holdings Inc (TSE:CWEB, OTCMKTS: CWBHF) announced a strategic alliance in Canada
  • December 2022: Tilray’s “RIFF” marijuana brand launched a new series of limited-edition strains in a joint effort with craft growers

Irwin D. Simon, Tilray Inc’s chairman and CEO, said the company’s focus on developing a global and diverse portfolio of brands will enable it to seize various opportunities.

“In the U.S., this includes investing in, acquiring or building compelling and profitable lifestyle CPG brands across craft beverage-alcohol and wellness consumer products that are cannabis adjacent, resonate powerfully with consumers, and are strongly positioned in key markets.” (Source: “Tilray Brands Reports Second Quarter Fiscal Year 2023 Financial Results,” Tilray Inc, January 9, 2023.)

Simon added,

In Europe, we believe that we are extremely well-positioned overall in a cannabis market. And, in Canada, we will be patient and strategic in building our competitive positioning amid the price compression and difficult operating conditions that we expect will, inevitably, consolidate the oversupply of licensed producers. These efforts will be supported and enhanced by one of the strongest balance sheets in the industry with close to $433.5 million in cash and marketable securities on-hand.

(Source: Ibid.)

15 Straight Quarters of Positive Adjusted EBITDA

For the second quarter of fiscal 2023, ended November 30, 2022, Tilray Inc announced that its revenue slipped by seven percent year-over-year to $144.1 million. The sales from its beverage alcohol segment, however, increased by 56% year-over-year to $21.4 million (including revenue from acquisitions). (Source: “Ibid.)

The company reported a second-quarter net loss of $61.6 million, or $0.11 per share. Meanwhile, it reported $29.2 million of operating cash flow and $25.4 million of free cash flow. Tilray Inc’s adjusted EBITDA of $11.7 million in the second quarter marked the company’s 15th consecutive quarter of positive adjusted EBITDA.

The company ended the second quarter of fiscal 2023 with $433.5 million in cash and marketable securities. Moreover, it maintained its top position in Canada, with an 8.3% share of the country’s legal marijuana market.

Analyst Take

Tilray stock may be taking a beating lately, but Tilray Inc has been doing everything right to position TLRY stock for growth once the market settles and marijuana is legalized in the U.S. at the federal level.

As mentioned earlier, the company has the No. 1 pot market share in Canada, and it’s well positioned to capitalize on the legalization of cannabis in Europe. In the U.S., Tilray Inc continues to invest in, acquire, and build profitable brands in the wellness and craft alcohol sectors.