Tilray Releases Earnings Miss

Tilray (Ticker Symbol: TLRY) released weaker than expected earnings after the closing bell on Tuesday.  The Canadian cannabis company reported an earnings per share miss of a loss of .32 cents per share vs. Wall Street analysts’ expectations of a loss of .25 cents per share.  However, Tilray reported released better than expected revenue at $45.9 million vs. Wall Street analysts’ expectations of $41.1 million. Canada legalizing marajuana last year, along with Tilray’s acquisition of hemp food producer Manitoba Harvest, help lead the company to better than expected revenues this quarter.

Tilray has been making some strategic moves and partnerships to help further its presence in the cannabis industry. In December of 2018, Tilray and Anheuser-Busch announced that they are joining forces with each other to do research within the drinkable cannabis space, where both companies have agreed to spend $50 million each on the venture. The move is not an acquisition, just a collaboration for research and development.  Tilray has also broadened its partnerships and partnered with Sandoz, a subsidiary of the drugmaker 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 19, 2018 at $23.05.  The stock proceeded to rally over 1,300%, trading to an all-time high of $300.00 in less than three months. Since then, Tilray has lost its luster and has retreated back down to reasonable valuations finding some price support around the $64.00 level while forming a descending triangle pattern. In a descending triangle, the bottom part of the triangle appears flat and the top part of the triangle has a downward slant. Buyers come in at the lows, and prices move higher up.  Prices make a lower high, which brings in more sellers and prices retest the old lows. Tilray broke out of this pattern to the downside in march of 2019, led by a disappointing first quarter earnings report.  The stock proceeded to trade lower over the course of the next few months.  The stock found some short term resistance at its 100-day Moving Average.  Currently, the stock is trading below both its 100 and 50-day Moving Averages.

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

Based on a survey of 11 analysts offering 12-month price targets, the average price target for Tilray’s stock is $68.50.  According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $41.04.

Marijuana stocks have been a major focus for the investment community in 2019.  There have been ten states (including the District of Columbia) that have already approved marajuana for recreational use and thirty-three states that have already legalized the use of medical marijuana. In time, even more states can be expected to legalize cannabis and provide additional investment opportunities, not only for institutions, but retail investors as well.  Investors in the space should look to Altria Group Inc. (Ticker Symbol: MO)  earning’s release on October 31st for fresh news within the cannabis sector.