A Tilray greenhouse of cannabis.
Patricia De Melo Moreira/AFP via Getty Images
Canadian pot grower Tilray reports fourth-quarter results after the market closes Wednesday. The marijuana stock rocketed up and down last week amid heightened interest from the retail traders on Reddit.
The consensus estimate from analysts polled by FactSet calls for Tilray (ticker: TLRY) to report a net loss of 14 cents a share for the quarter. Analysts expect Tilray’s sales grew to $56 million, up 19% year-over-year, according to FactSet.
While the company’s sales will be in focus, how Tilray shares are trading compared with Aphria (APHA) is also key for investors to consider. Those companies announced a merger in December. Aphria CEO Irwin Simon said in January that he expects that deal to close in the second quarter of this year.
Under the announced terms of the deal, an investor would get about 0.84 share of the combined Tilray for each share of Aphria that they owned. Cantor Fitzgerald analyst Pablo Zuanic wrote in a note on Tuesday that as of last week’s close, Aphria stock traded at a 51% discount to the merger conversion price
Zuanic raised his price target on Tilray stock to $30.25, up from $24.20, on Tuesday, but still has a Neutral rating. He has an Overweight rating on Aphria stock, and just raised his target to 32.50 Canadian dollars (US$25.61) from C$26. Given the gap in recent performance, Zuanic prefers playing the merger with Aphria, rather than Tilray.
“The recent significant bout of volatility in Canadian cannabis stocks may be another deterrent for investors looking at this subsector (aside of mixed fundamentals and valuation),” he wrote.
Still, Zuanic thinks the larger, better-managed Canadian growers have some growth potential. “In this sense we continue to appreciate the strategic logic and value of the merger of Tilray and Aphria,” he wrote.
Tilray stock was up 5.1% Tuesday morning, while Aphria stock was up 16%. ETFMG Alternative Harvest (MJ), an exchange-traded fund with exposure to cannabis businesses, was up 4.9%, while the S&P 500 index was flat.
Write to Connor Smith at [email protected]
