Before trading kicks into action on Wednesday (April 6), Tilray (TLRY) will present F3Q22’s financial results (February quarter).
Those with an optimistic bent might want to lower expectations, if Canaccord’s Matt Bottomley’s forecast is anything to go by.
“For the quarter, we are expecting the combination of a seasonally slower period and continued macro-level headwinds in the Canadian recreational environment (namely saturated competition and pricing pressures) to result in a relatively flat print on both the top line and Tilray’s profitability profile,” said the 5-star analyst.
At a “consolidated level,” Bottomley anticipates that Tilray will deliver net revenue of US$155.7 million in the quarter, amounting to a very “modest” sequential increase of ~0.4%.
Broken into segments, Bottomley expects “continued pressure on Canadian cannabis sales.” Total gross Canadian medical + recreational sales are expected to reach US$50.6 million, which would represent a quarter-over-quarter drop of around 12%. “Our estimate assumes incrementally lower medical contribution with most of the decline attributable to adult-use sales,” the analyst explained.
While Tilray is in the process of “better rationalizing its pricing and SKU offerings,” retail sales across the sector are anticipated to decline sequentially, with point-of-sales data indicating a QoQ drop of over 20% for Tilray branded products. As such, Bottomley thinks the company is still “susceptible to macro-level headwinds within its adult-use segment.”
On a more positive note, the acquisition of the US-based Breckenridge Distillery and marginally higher international sales should “slightly” offset the bearish trends, with Bottomley expecting distribution and international export revenue to sequentially tick higher. However, that also comes with caveats. “Although FQ3 typically sees a slight seasonal bump in distribution sales, we believe the impact of the COVID-19 Omicron variant will likely offset some of this growth in the period,” the analyst summed up.
Nevertheless, Bottomley’s rating stays a Buy, backed by a $9 price target. The implication for investors? Upside of 28%. (To watch Bottomley’s track record, click here)
The Street’s assessment of Tilray’s prospects presents something of a conundrum. On the one hand, based on 7 Holds, 3 Buys and 1 Sell, the stock makes do with a Hold consensus rating. That said, most think the shares are still undervalued; going by the $10.22 average target, the stock is expected to add 45% of muscle in the year ahead. (See Tilray stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
