A New Reason to Check Out Tilray Inc?
This Nasdaq Pot Stock Deserves a Look
If you need a reminder of how volatile things can be in pot stock investing, just take a look at the stock chart of Tilray Inc (NASDAQ:TLRY).
Tilray Inc went public on July 19, 2018, marking the first cannabis company to complete an initial public offering (IPO) on the Nasdaq. Its IPO price was $17.00 per share but the stock soon skyrocketed. On September 19, 2018, TLRY stock reached an intraday high of $300.00, a number that’s 1,664% higher than its IPO price.
But as we know now, the U.S. stock market had a serious sell-off in the fourth quarter of 2018. Due to the massive rise in pot stocks prior to that, the sector took a serious beating in that downturn. Since then, Tilray shares have been trending downward and they are yet to make a meaningful recovery.
At the time of this writing, Tilray stock traded at just $30.07 apiece, down about 90% from its all-time intraday high. Ouch!
Still, that doesn’t mean pot stock investors should take TLRY stock off their watch list. Tilray Inc just announced a new acquisition, which could open up some new opportunities for the company.
Tilray Inc (NASDAQ:TLRY) Stock Chart
Chart courtesy of StockCharts.com
Time to Check Out Tilray Stock
On August 29, Tilray announced that it had entered into a definitive agreement to acquire all of the issued and outstanding securities of 420 Investments Ltd. (Source: “Tilray Announces Definitive Agreement to Acquire FOUR20 Adult-Use Cannabis Retailer,” Tilray Inc, August 29, 2019.)
Also known by its brand name FOUR20, 420 Investments Ltd is a recreational cannabis retail operator headquartered in Calgary, Alberta, Canada. The company already has six brick-and-mortar dispensaries in Alberta and it has secured 16 more high-traffic locations in desirable areas of the province, including Edmonton, Calgary, and Canmore.
Under the agreement, Tilray Inc will deliver CA$70.0 million worth of Tilray Class 2 common stock to FOUR20 at closing, plus a potential CA$40 million worth of Tilray Class 2 common stock subject to “the achievement of certain performance milestones by FOUR20.”
“FOUR20 offers a premium retail experience for the mainstream cannabis consumer and builds on our broader retail strategy, which includes several minority investments in other leading cannabis retailers,” said Tilray’s Chief Corporate Development Officer Andrew Pucher. (Source: Ibid.)
“With FOUR20, we will elevate the retail experience for consumers by offering the best quality-tested products while preparing for the next wave of legalized product launches taking place by year’s end,” he continued.
The deal is expected to close by the end of the first quarter of 2020.
Now, the neat part about this transaction is that it will give a solid boost to Tilray’s presence in Alberta. You see, while Alberta is only the fourth-largest province in Canada by population (behind Ontario, Quebec, and British Columbia), the region’s cannabis sales have been booming.
As a matter of fact, Statistics Canada recently revealed that, from October 2018—when the country legalized recreational marijuana—to June 2019, Alberta’s cannabis sales totaled CA$123.6 million. (Source: “Retail trade sales by province and territory,” Statistics Canada, last accessed August 30, 2019.)
To put that in perspective, the amount was higher than in any other Canadian province or territory during this period.
That means Tilray’s acquisition of a new fleet of cannabis retail stores in Alberta could fuel the company’s future growth.
Analyst Take
At the end of the day, keep in mind that, despite the downturn in TLRY stock, the company is still running a fast-growing business.
In its most recent quarter, Tilray’s revenue surged 371% year-over-year to $45.9 million. Notably, the company’s Canadian recreational marijuana revenue nearly doubled sequentially to $15.0 million. (Source: “Tilray, Inc. Reports Second Quarter 2019 Financial Results,” Tilray Inc, August 13, 2019.)
Given the current market environment, it’s hard to say when Tilray stock will make a comeback. But with another acquisition in the booming Canadian recreational cannabis industry, the company’s growth story just got more convincing.
