Recent Reddit rallies, a happy start to the new fiscal year, and a whole bunch of weed; we ask if Tilray is a good investment right now?
Feb. 20, 2021
With the Reddit-induced rally on weed stocks, and its recent Q4 earnings report, I thought it might be time to review Tilray (NASDAQ: TRLY) as a potential investment for 2021. In an industry that seems to be plagued by disappointment on the one hand, but has diehard enthusiasts on the other, is Tilray now the stand-out crowd-pleaser?
Let’s take a look, shall we?
Bull case
Tilray recently posted its Q4 earnings which showed profitability in that quarter. It recorded $50.7 million in revenue, up 19% year-over-year (YoY), with $2.2 million in positive adjusted earnings. This is an important milestone for a cannabis stock, as the industry currently is seen to be both unstable and unprofitable.
In other news, Aphria (NASDAQ; APHA) and Tilray are in the process of a large and important merger. This merger will make the combined businesses the largest marijuana company in the world by revenue. The name Tilray will be kept as it has more recognition as a brand, it will also continue to trade under TLRY. Those with investments in Aphria will be given stock in Tilray instead.
Tilray and Aphria are Canadian weed-stocks, which traditionally fare better than their U.S. counterparts. Furthermore, these two companies have international expansions; with Aphria playing a role in German pharmaceutical distribution, whilst Tilray has a marijuana facility in Portugal, which currently ships to Spain and other European countries. With the combined power that these two stocks will have, there isn’t much stopping Tilray from dominating the cannabis industry.
The cannabis sector also benefits from surges of enthusiasm for the industry as a whole. Whilst in the short-term this creates volatility, in the long-term, these surges might start to build real traction for weed stocks to be valued as serious investments. Indeed, even marijuana ETFs are showing some growth too, with AdvisorShares Pure Cannabis ETF (NYSEARCA: YOLO) stock growing around 43% in 2020.
Now Tilray is starting to show some profitability, as well as an exciting merger on the horizon, this company could present a risky, yet potentially rewarding investment opportunity.
Bear case
The recent Reddit-fueled rally on weed stocks really epitomized the volatility of this industry and even Tilray was not immune to the consequences. Thus, when GLJ Research analyst Gordon Johnson told investors to sell their shares of Tilray, they did. He predicts that this company will collapse by 2022 as its prospects are ‘dismal’.
Since Tilray’s peak on the 10th of February, the stock is currently down around 50%, with the Reddit-induced rally losing steam adding to the worries of the Q4 earnings report before it was published. This suggests that even the investors in Tilray are not too convinced in this stock as a long-term buy and this in itself could be worrying moving forward as Aphria and Tilray merge. Bigger companies require more complex systems which then highlight problematic inefficiencies, personnel implications, and overall issues with merging costs.
Furthermore, its most recent earnings report was a nice change to what has been a year of pretty anemic quarterly growth. Q4 of 2019 reported a $35.3 million loss for its Adjusted EBITDA, and even the previous quarter Q3 of 2020 saw a $1.5 million loss. Investors should keep an eye on this trend; if this quarter is the break out this stock needs, then great! But, if it goes back to continued losses on a quarterly basis, then maybe investors in this company should be cautious.
So, should I buy Tilray stock?
Tilray stock is definitely worth looking at as an investor, it has made a marked improvement in its business and if this quarter is anything to go by, it could be starting to reap the rewards. With its international presence and its business merger, this stock is definitely one to watch or invest in if you like a bit more of a risk.
Quickfire round
Brendan Kennedy is the CEO of Tilray as well as the co-founder of Privateer Holdings, a private equity company that invests in the legal cannabis business.
- Where is Tilray headquartered?
Tilray is headquartered in Nanaimo, British Colombia, Canada. They also have main offices in Toronto, Canada, and offices in Chile, Portugal, and Germany.
- Can I buy Tilray stock?
Yes, Tilray has been a publicly-traded company since July 2018, and trades on the Nasdaq under the ticker symbol ‘TLRY’.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.