Is Tilray Stock A Buy After Earnings?

Market Trading EssentialsOctober 14, 2021

3 minutes read

Canadian pot producer Tilray (TLRY) this month reported first-quarter results that missed expectations. So is TLRY stock a buy right now?

The company reported an eight-cent per-share loss, worse than the six cents expected by FactSet. Sales of $168 million were below forecasts for $172.6 million.

Cannabis revenue made up less than half those sales, amounting to around $70.4 million for the quarter. And in keeping with prior quarters, Tilray’s pharma distribution business — which it absorbed when it merged with rival Aphria this year — also contributed heavily that overall revenue figure, bringing in around $67.2 million.

Sales from Tilray’s alcoholic beverage unit — it owns Atlanta-based craft brewer Sweetwater — came in at $15.4 million. Its wellness business, made up of hemp-granola and CBD-product maker Manitoba Harvest, had $14.9 million in sales.

The company’s results fell in line with a broader trend in Canada’s cannabis industry — continued losses, after growing too quickly and producing more pot than people wanted.

The company is trying to find ways into the U.S. ahead of federal legalization. But its positioning there — via a craft brewer, hemp-products company and an investment in struggling cannabis retailer MedMen — has raised questions from analysts.

MedMen’s path to profitability has been bumpier than rival U.S. multistate operators. The company has been trying to turn itself around after overexpanding, lawsuits and accusations of executive excess.

Tilray’s investment deal with MedMen deal hands Tilray a chunk of MedMen’s debt once held by Gotham Green Partners, a longtime private-equity supporter of MedMen. That debt can eventually convert into stock. That conversion would give Tilray a minority stake in MedMen’s shares once pot is federally legal in the U.S.

Not everyone was sold by the deal.

“MedMen is a well-known cannabis brand, but is still contending with numerous issues borne from the legacy management team leaving this business as a broken asset,” Stifel analyst Andrew Carter said in a research note.

Below, we take a closer look at TLRY stock.

TLRY Stock Fundamental Analysis

Tilray’s merger with Aphria this year gives the combined company a market value that puts it closer to Canopy Growth (CGC), currently the largest Canadian pot stock. Tilray has a market cap of around $4.9 billion, according to Marketsmith. Canopy’s market value is around $5.5 billion.

Earnings growth is a staple of top stocks. But the EPS Rating of TLRY stock stands at 14, with 99 being the best possible. Other Canadian marijuana stocks also have not-great profit ratings, as they continue to lose money. The EPS Rating is a gauge of a company’s profit growth.

The Composite Rating of TLRY stock stands at 14, according to Marketsmith chart analysis. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.

Analysts expect Tilray to lose money, when measured by earnings per share, through this fiscal year, which began in June. They see it losing money in the fiscal year after that.

The company’s SMR Rating — or Sales + Margins + Return on Equity rating — is a not-great D. The rating tallies the past three quarters of sales growth, pretax and after-tax profit margins and return on equity.

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Tilray Stock Technical Analysis

TLRY stock began trading in July 2018 on the Nasdaq via an IPO. That IPO was the first on a big U.S. exchange from a pure-play cannabis company.

But the stock largely fell between then and September of last year, after industrywide concerns about profitability, sales growth and cash grew more severe.

This year, shares soared as much as 711%, hitting 67 on Feb. 10. The stock is well off those levels, and is below its 50-day line. Shares are not in a buy zone, and no new base pattern has formed.