Is TLRY Stock Overvalued?
There have been few marijuana stocks as exciting as Tilray Inc (NASDAQ:TLRY). The first legal marijuana company to have an initial public offering (IPO) on the Nasdaq has seen its value grow by triple-digits in the few short weeks it has existed as a publicly traded company.
The TLRY stock IPO is concrete proof that many U.S. investors are aching for more marijuana companies to register on stock exchanges. But does the company have substance beyond the hype of the IPO? Looking at the TLRY stock forecast, I believe it does.
The Tilray stock price today is about 125% higher than it was when it first entered the market. That’s an insane amount of gains in just over a month. It represents one of the best investments for the marijuana bulls who were lucky or sharp enough to have bought it early on.
After TLRY stock jumped to near 80% gains in its first few days on the market, I anticipated a pullback. I was proven correct: the value was sent down to about 50% gains since the IPO, then to about 30% the following week.
Chart courtesy of StockCharts.com
But the stock steadily climbed back up, hitting 50% gains before the recent deal between Constellation Brands, Inc. (NYSE:STZ) and Canopy Growth Corp (NYSE:CGC) sent the whole cannabis industry soaring.
Now we have a Tilray stock price at triple-digits and a forecast that looks very positive.
The company will undoubtedly face some form of correction for its hasty gains, losing some of its value in the near future. But overall, Tilray has a lot going for it that will help ward off the charges of overvaluation.
Tilray Production/Supply Capacity
One of the most important parts of the Tilray stock forecast has to do with the company’s production capacity.
The ability to produce the requisite amount of cannabis to meet growing demand is paramount, especially for a company based in Canada, where legalization is just a few weeks away.
Tilray Inc seems poised to use the massive influx of capital that came as a result of its very successful IPO to increase its production capacity to meet that growing demand.
The company plans to have about 912,000 square feet of production facilities up and running by the end of 2018, spread across the five continents it currently operates in.
And that may just be the start.
The company has claimed that it has about 3.8 million square feet of development potential, allowing it to expand as needed for years to come.
And it will likely need those expansions, since the company has not only entrenched itself in the Canadian marijuana market via supply agreements, but also across the globe.
In terms of Canada, Tilray has a definitive supply agreement with Shoppers Drug Mart Corporation, the largest pharmacy chain in the country.
On top of that, Tilray has signed multiple agreements with several provinces and territories in Canada.
Most importantly, the company has deals with Canada’s two largest provinces: Quebec and Ontario. Both of those provincial agreements are expected to be lucrative.
Tilray recently announced that it had been among the cohorts first to sign an agreement with Ontario to serve as suppliers to the massive province. Tilray will supply a number of cannabis products to Ontario via its affiliate High Park Holdings Ltd., DBA High Park Company.
“We are thrilled to partner with the OCS [Ontario Cannabis Store] as a reliable supplier for safe and secure cannabis to Ontario,” said High Park Chief Marketing Officer Adine Fabiani-Carter. (Source: “Tilray Announces Agreement with the Ontario Cannabis Retail Corporation to Supply a Variety of Adult-Use Cannabis Brands and Products,” Tilray Inc, August 20, 2018.)
“Our goal is to deliver on the high expectations that Ontarians have of us by cultivating and distributing a portfolio of world-class adult-use brands and products that will lead the market in quality, excellence and craftsmanship.”
Tilray International Expansion
The TLRY stock forecast is also being bolstered by its international expansion. The company has operations that span the globe, including Chile, Australia, Argentina, Cyprus, Croatia, Germany, and South Africa.
Tilray is also the first company to legally export medical cannabis from North America to Europe, South America, Africa, and Australia. (Source: “Is Pot Stock Tilray Inc. Overvalued?,” Forbes, August 15, 2018.)
I’ve long maintained that the future of the marijuana industry lies in the global markets, and Tilray has taken that to heart.
The company is ready not only to take advantage of the events on the horizon like Canadian marijuana legalization, but also future growth in markets that will prove to be even more lucrative, like Germany.
Tilray operates in an interesting sector, being very focused on medical cannabis and innovating in that field. If the company’s research bears fruit, we might see a medical breakthrough from Tilray that boosts its stock value even further.
It’s not unlike investing in the traditional pharmaceutical market, where long, intense research can lead to big payoffs.
Tilray stock also helps diversify investor portfolios by giving them exposure to a company that can take advantage of sectors on shorter time frames, such as retail recreational cannabis, while still toiling away on larger projects that could yield massive payoffs down the line.
Of course, pharmaceutical research carries with it the potential to tank a stock if tests come back negative, making the stock potentially more volatile overall.
Is TLRY stock overvalued? If you look at the numbers, such as its price-to-earnings ratio, it’s easy to make that case. But that could be said of a lot of marijuana companies.
The fact is that the TLRY stock forecast looks strong when you project the long-term potential of the company. The potential, of course, is related to the global expansion of the marijuana market.
As such, I believe that Tilray Inc will be more than just a one-trick IPO pony. Its presence on the Nasdaq could pay off down the line.