TLRY Stock Prediction: Tilray Inc is Rallying Strong, But Is it Sustainable?

Tilray Inc Can TLRY Stock Sustain Its Current Growth
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TLRY Stock Surge

It’s hard to find a more disappointing stock in the marijuana industry than Tilray Inc (NASDAQ:TLRY). Sure, some are worse performers, but none had the same amount of hype followed by such a precipitous fall.

But Tilray stock’s fortunes have turned around recently, with a huge rally at the beginning of June.

Does that mean the TLRY stock forecast is suddenly rosy again? I’d caution investors to be a little wary before hopping back on the bandwagon.

First let’s examine why this stock’s performance has been gangbusters as of late, as the below chart shows:

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Chart courtesy of StockCharts.com

The overall stock market rally in June has certainly helped. While many marijuana stocks have been surging this month, Tilray stock especially has been on a tear.

Suffice it to say, things are looking up for the entire marijuana industry, Tilray included.

But something unique is happening with TLRY stock that can’t be discounted. The stock climbed nearly 19% on June 10. A 20% gain in a single day of trading is absolutely nuts.

That large gain was motivated in part by Tilray’s announcement of a deal with its majority shareholder, a cannabis company backed by venture capitalist Peter Thiel, to sell the fund’s stake gradually over the next two years. (Source: “Tilray surges on plan to release 75 million shares held by cannabis company backed by Peter Thiel,” CNBC, June 10, 2019.)

Privateer Holdings created Tilray Inc in 2013 and took it public last summer. Thiel’s Founders Fund was an early backer of Privateer in 2014.

Privateer holds 77% (75 million shares) of Tilray’s outstanding shares, worth roughly $3.0 billion. At the company’s peak many months prior, it was worth over $16.0 billion.

Tilray will acquire Privateer in a downstream merger, with Privateer’s current stake being released to the market over the next two years. Tilray hopes this will clear the stock overhang.

In the first year following the transaction, shares will be sold to institutional and strategic investors to be determined by Tilray. Remaining shares will be released over the second year at a staggered rate.

“Privateer is giving Tilray a lot of operational flexibility and obviously believes in long-term value of this business and is not pushing to sell its shares as soon as possible, so it’s kind of mutually beneficial, this transaction, for both parties,” said Tilray Chief Financial Officer Mark Castaneda. (Source: Ibid.)

So what we have here is a buildup of excitement in an already frothy market. In other words, a recipe for massive gains.

The question, then, is whether these gains are sustainable long-term and whether the future of TLRY stock is now upward.

Tilray Stock Prediction

When it comes to my Tilray stock prediction, you have to look back before you can look forward. While the stock’s more recent success is all well and good, that does little to offset its awful performance in 2019 so far.

Just look at the chart below: one of Tilray’s top competitors, Canopy Growth Corp (NYSE:CGC), has seen enormous gains in 2019, while TLRY stock has not just slumped, but has practically fallen off the face of the earth.

Chart courtesy of StockCharts.com

Tilray stock is getting hit hard, and much of that is due to its massive surge when its shares first went public. By jumping so high, so fast, TLRY quickly turned into a bubble, one that instead of bursting has seen its air leaking out in a long, drawn-out decline that has been at work since last summer.

As Tilray Inc approaches its first anniversary as a publicly traded stock, it has seen one of the worst years on the marijuana market, period.

So does the company have any hope for redemption? Absolutely.

While much of Tilray’s earlier rise in the stock market was due to hype, there is still substance to what the pot company offers. Not to mention that it operates on the Nasdaq, an exchange that I believe is better suited than others for marijuana stocks.

In the end, however, there are a lot of question marks around whether Tilray stock can sustain its gains long-term.

I’ve projected before that Tilray stock would fall below $40.00 unless a big turnaround event took place. I don’t think the aforementioned share release is that deal.

While it will generate gains for a short while, long-term, TLRY stock will once again begin to tumble.

That means day traders have an excellent opportunity to make quick gains and cash in on the volatility. For long-term investors, I think they are better served by looking elsewhere on the marijuana stock market.

The thing is, TLRY stock’s extreme volatility and inaccurate valuation have made its future hard to gauge. The company has the potential to double or halve within the next 12 months depending on a number of factors. Few pot stocks carry this amount of risk.

But there is also almost no other company of Tilray’s size that can register 20% stock gains in a single day; it would take a lot more to motivate these types of gains from, say, Canopy Growth.

As such, there is value in TLRY stock, but it comes with a healthy serving of risk.

Analyst Take

When I write about Tilray Inc, it feels like I’m back at the start of the marijuana market again. Not because of the company’s massive potential, but instead due to its volatility. It feels like anything can happen with Tilray stock.

As such, my prediction for TLRY stock is tentative. It’s hard to make a solid pronouncement regarding the company when so much of its past has been unpredictable.

Still, there is money to be made from Tilray stock. It will take nerves of steel and an ability to weather severe dips, but for investors looking for quick cash, TLRY stock may be for you.