TLRY Stock Forecast: Positives
The company’s supply agreement with the Canadian province of Nova Scotia will be fulfilled via its subsidiary, High Park Holdings Ltd.
“We’re thrilled High Park will have the opportunity to supply the province of Nova Scotia with a safe, secure and reliable source of adult-use cannabis products,” said Adine Fabiani-Carter, Chief Marketing Officer at High Park, in a statement. (Source: “Tilray Selected by Nova Scotia Liquor Corporation to Supply a Variety of Adult-Use Cannabis Brands and Products,” Financial Post, August 27, 2018.)
“Our intention is to deliver on the high expectations Nova Scotians 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.”
The second major supply agreement that the company signed in August came by way of Ontario, Canada’s most populous province.
The province recently shifted from a public monopoly on marijuana storefronts to private ownership, radically altering how marijuana sales will function in the region.
As such, Ontario has been signing supply deals with a good number of marijuana companies and many of the heavy hitters, including Tilray.
The Cannabis Retail Store, a government entity, signed a supply agreement with Tilray for the marijuana company to supply the province with a variety of cannabis products for use starting on October 17.
Chart courtesy of StockCharts.com
“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,” said Fabiani-Carter in a separate statement. (Source: “Tilray® Announces Agreement with the Ontario Cannabis Retail Corporation to Supply a Variety of Adult-Use Cannabis Brands and Products,” Business Wire, August 20, 2018.)
In order to fulfill those agreements, the Tilray stock IPO—which has been massively successful—has led the company to expand its production capacity. And following its IPO, Tilray certainly has the capital to do so.
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.
Tilray maintains operations in 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.)
Tilray has also begun to work on its recreational marijuana market presence.
Finally, the company showed strong numbers in its first-ever quarterly report as a public company.
Revenue increased to $9.7 million, up 95.2% compared to the second quarter of last year. The increase in revenue was driven by increased patient demand in Canada, sales to other licensed producers, and international sales. (Source: “Tilray, Inc. Reports Second Quarter 2018 Earnings,” Tilray, August 28, 2018.)
Alongside the revenue increase, the company saw a 97% jump from 745 kilograms sold to 1,514 kilograms compared to the prior year.
While all that is great news, there are still concerns about the TLRY stock forecast.
TLRY Stock Forecast: Obstacles
There are plenty of good reasons to be bullish on the TLRY stock forecast, but there are also quite a few concerns.
Citron Research, headed by activist short-seller Andrew Left, came out recently on Twitter with an attack on TLRY stock.
Citron LOVED $TLRY at $26 but now we are SHORTING stock. Cowen lowered est and still raised tgt $62 only shows "RETAIL INVESTORS GONE MAD" and forgot $TLRY went public at $17 – 6 weeks ago. We would expect an equity raise at these levels. By far most expensive in space.
— Citron Research (@CitronResearch) September 4, 2018
Citron also fired shots at Cronos Group Inc (NASDAQ:CRON), only to see the company’s stock value rise in the following week after a major deal was signed. So Citron’s most recent track record doesn’t look too great. But long-term, there are reasons to be worried about TLRY stock.
Consider that the company has a revenue that doesn’t even crest $10.0 million, but is currently valued at $7.17 billion. That’s nearly $700.00 in market cap for every $1.00 of revenue.
It’s certainly pushing the limits of what would be considered sensible.
Also worth mentioning is that the company has grown over 230% over the past month with almost no real market pushback.
Tilray is a fantastic marijuana stock, but even the best ones have to face corrections at some point. Since the company has largely avoided one, I imagine that the TLRY stock forecast contains a major pullback at some point down the road.
On the flip side, you do have marijuana legalization on October 17 in Canada that will help bolster the stock.
And while the disparity in revenue and valuation is large, the company has grown so quickly that it hasn’t had a proper amount of time to put its newfound capital to use. As such, rapid expansions and more supply agreement deals could help square the two.
Furthermore, Tilray’s high-margin oil products are unique products that will help separate the company from its competitors.
All this combines to make the TLRY stock forecast a mixed bag of great potential, but with a correction looming.
There’s a lot of money to be made in the Tilray stock forecast, no doubt about that.
The company has a strong global presence, has caught and kept the eye of Wall Street since its Nasdaq IPO, and continues to make the correct moves by expanding both its production capacity and its supply agreement deals.
The issue is that there are concerns over just how fast it has grown. And with no correction to temper that massive growth, I do see a pullback down the line for the company in a big way.