Compelling Bet on This NASDAQ Listed Cannabis Stock - TLRY

Dec 21, 2021 12:00 AM PST | Team Kalkine
Compelling Bet on This NASDAQ Listed Cannabis Stock - TLRY

Tilray, Inc.

TLRY Details

Tilray, Inc. (NASDAQ: TLRY) is a significant cannabis lifestyle and consumer packaged goods company operating in Canada, the United States, Europe, Australia, and Latin America. Its headquarters are in Leamington and New York. The majority of its revenue comes from Canada and the worldwide medicinal cannabis export industry. CBD products from Manitoba Harvest and beer from SweetWater are the only items available in the United States.

Latest News:

  • Inorganic Endeavors: TLRY announced the strategic acquisition of Breckenridge Distillery, a leading distilled spirits platform in Breckenridge, Colorado, on December 08, 2021. The transaction is expected to be immediately accretive to TLRY's EBITDA. Breckenridge and TLRY's existing SweetWater brands have many potentials to complement one other, boosting their respective reach and creating more lucrative growth in the beverage alcohol category, according to TLRY.
  • Launch of Oral Strips: TLRY stated on December 2, 2021, that Aphria, its medical subsidiary, has introduced medicinal cannabis oral strips in THC and CBD-rich variations. Each Aphria medical strip comprises a thin, edible film containing rapidly dissolving, micronized cannabinoids entering the bloodstream, giving patients a fast-acting and precise dosing experience for various disorders.

Q1FY22 Results:

  • Growth in Topline: TLRY reported a 43.01% increase in net revenues to USD 168.02 million in Q1FY22 (ended August 31, 2021) from USD 117.49 million in Q1FY21 due to the rise in sales from the cannabis business and the beginning of new beverage and wellness business revenues.
  • Surge in Losses: TLRY witnessed an increase in net losses to USD 34.60 million in Q1FY22 from USD 21.74 million in Q1FY21.
  • Cash & Debt Position: The company's cash and cash equivalents were USD 376.30 million as of August 31, 2021, with total debt (including convertible debentures) of USD 816.60 million.

Key Risks:

  • Customer Concentration Risk: A significant amount of TLRY's revenue comes from major clients. Its revenue could drop dramatically if it fails to retain or increase its client connections or if key consumers lower their purchases.
  • Dependence on Third Parties: TLRY relies heavily on producing and selling approved and certified cannabis flowers. It may need to rely on third-party suppliers for high-grade cannabis flowers, which might raise expenses and expose the company to unstable supply chains and product quality.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TLRY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

TLRY's share price has fallen 69.25% in the past nine months and made a new 52 week low today. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 27.57, indicating an oversold zone. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 9.00.

Considering the significant correction in the stock price in the past nine months, recent acquisitions, new product launches, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.34, down 8.02% as of December 20, 2021, 1:29 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.