Tilray Earnings Possible Signal For Cannabis’ Next Catalyst

Canadian cannabis producer Tilray (Ticker Symbol: TLRY) reported its fourth-quarter earnings on Monday.  The company reported fourth-quarter revenue of $15.5 million, up over $5 million from the same quarter in 2018.  The rise in revenue reflected an over 100% increase in total sales in 2018 to $43.1 million. Analysts had been expecting fourth-quarter 2019 sales of $14.1 million but the first months of legal recreational cannabis in Canada helped boost sales.

Tilray shares reacted positively after the announcement, jumping higher after the initial release of the news.  After digesting the release, shares began to ease off of highs due to highlighted margin pressures within the report. Tilray’s Chief Executive Officer, Brendan Kennedy stated, “Gross margins for the fourth quarter were nearly a third of the rate of the previous period, thanks to increased procurement costs and taxes for medical patients.”

Tilray has also been locking in some strategic partnerships. In December of 2018, Tilray and Anheuser-Busch announced that they are teaming up together to research drinkable cannabis.  This is not a direct investment in the business and they will spend 50 million dollars each on the venture. Tilray has also broadened its partnerships and partnered with Sandoz, a subsidiary of the drug maker Novartis, to expand its ability to reach cannabis patients globally.  The partnership plans on supplying non-smokeable and non-consumable medical cannabis products.

Tilray’s Initial Public Offering was on July 19th, 2018 at $23.05.  The stock proceeded to multiply over tenfold, skyrocketing to just over $300.00 in less than three months. Since then, Tilray has lost its sizzle and retreated back down to reasonable valuations finding some big price support around the $64.00 level.  The 100-day Moving Average has been hovering just above Tilrays stock for most of 2019, adding some slight pressure. If the stock was to find legs higher, a move above the 100-day Moving Average and the psychological $100.00 price level would seem very technically promising to the upside.      

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 7 analysts across Wall Street, the average price target for Tilray’s stock is $100.33.  According to that average, the stock is priced at a discount relative to Wall Street’s analysts and currently near the low end of analysts price targets. Tilray’s stock is currently trading at $70.54.

Marijuana stocks have become all the investment rage with demand coming from not only institutions but retail investors as well. There have been ten states (including the District of Columbia) that have already approved it for recreational use and thirty-three states that have already legalized the use of medical marijuana. Tilray, which is 76% owned by Privateer Holdings, has been the leader of the pack as one of the favorites stocks for cannabis investors. We’ll be watching to see how Tilray’s investments play out and if it’s going to have enough momentum to continue leading the cannabis sector.      



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