Yahoo Finance Tilray Just Soared 40% This Week: Is the Stock a Good Buy Now?
Written by Aditya Raghunath at The Motley Fool Canada
Shares of Canadian cannabis producer Tilray (TSX:TLRY) have been quite volatile this week. After rising 40% on Tuesday, they fell 18% yesterday, valuing the company at a market cap of $2 billion.
Several cannabis stocks, including Canopy Growth, Cronos, and SNDL, gained significant momentum on Tuesday after the U.S. Drug Enforcement Agency (DEA) announced its intention to reschedule marijuana as a Schedule III drug. Since 1971, marijuana has been classified as a Schedule I drug even though medical marijuana is legalized in more than 35 states south of the border.
Investors should understand that rescheduling the drug doesn’t make it legal at the federal level. In fact, the White House Office of Management and Budget still has to approve the recommendation for the rescheduling to pass.
But is the battle over for licensed marijuana producers in Canada who are looking to enter the world’s largest pot market to boost sales and profit margins? Earlier this year, Tilray chief executive officer Simon Irwin told The Wall Street Journal that the company would actively seek to enter the U.S. once marijuana is rescheduled, either organically or by targeting acquisitions.
Tilray stock is fundamentally weak
In the fiscal third quarter (Q3) of 2024 (ended in February), Tilray reported revenue of US$188.3 million, an increase of 30% year over year but below estimates of US$198.3 million. However, it reported break-even non-GAAP (generally accepted accounting principles) in Q3, compared to estimates of a loss of US$0.05 per share.
Tilray’s top-line growth was driven by acquisitions. In late 2023, Tilray acquired multiple beer brands from Ab InBev, allowing its alcohol beverage business to almost triple sales year over year to US$54.7 million. Comparatively, Tilray’s acquisition of Hexo and Truss last year helped it increase cannabis sales by 33% to $63.4 million in the last quarter.
Simon stated, “Over the past several years, our playbook of expanding our cannabis business to complementary markets such as beverages and hemp-based consumer products has positioned us well to navigate the current environment and to benefit from future growth opportunities.”
The marijuana producer’s growth was partially offset by lower distribution sales, which fell 13% to $56.8 million due to a change in regulations regarding rebates and technical infrastructure outages.
Investors were concerned with Tilray’s lower outlook for fiscal 2024 (ending in May). The company expects adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) between US$60 million and US$63 million, which is lower than its previous mid-point estimate of US$73 million.
Tilray also claimed it would report a positive free cash flow by the end of 2024, but it has since withdrawn this forecast. Canada’s leading marijuana producer explained that the delayed timing of cash collections on asset sales has hampered its cash flow-generating ability in recent months.
What is the target price for TLRY stock?
Shares of Tilray are down over 95% from all-time highs, and it is still a risky buy for investors. Analysts tracking the TSX cannabis stock expect revenue to rise from US$627 million in fiscal 2023 to US$869 million in 2025. Comparatively, losses per share are forecast to narrow from US$2.35 in 2023 to US$0.1 per share in 2025.
Analysts remain bullish and expect TLRY stock to gain over 15% in the next 12 months. Given recent developments in the U.S., Tilray’s long-term thesis has just improved, and it may seem an interesting buy for those with a high-risk appetite.
The post Tilray Just Soared 40% This Week: Is the Stock a Good Buy Now? appeared first on The Motley Fool Canada.
Should you invest $1,000 in Anheuser-busch Inbev Sa/nv right now?
Before you buy stock in Anheuser-busch Inbev Sa/nv, consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Anheuser-busch Inbev Sa/nv wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.
Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $15,578.55!*
Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.
See the 10 stocks * Returns as of 3/20/24
More reading
Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.)
How to Build a Bulletproof Monthly Passive-Income Portfolio in 2024 With Just $25,000
Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends SNDL and Tilray Brands. The Motley Fool has a disclosure policy.
2024
