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Tilray Plunges 10% As Canadian Cannabis Market Remains Under Pressure

Shares in Canadian pharmaceutical and cannabis company Tilray (TLRY) plunged 10% in Monday’s after-hours trading on mixed second quarter earning results. The stock had climbed 7% during the day in the build up to the print.

Specifically, Q2 GAAP EPS of -$0.66 missed Street expectations by $0.39. Meanwhile revenue of $50.4M missed by $4.59M (despite rising 10% year-over-year) due primarily to challenges in the Canadian Recreational market. Revenue declined 3% sequentially from Q1 driven by the impact of COVID-19 and a limited number of retail store additions in Q2.

“With our significant cost cutting and balance sheet actions behind us, we have positioned Tilray to enter the second half of 2020 in a stronger position so we can remain focused on achieving profitable growth in all our markets and deliver break-even or positive Adjusted EBITDA in the fourth quarter of 2020” commented Brendan Kennedy, Tilray’s CEO.

On the positive side, an adjusted EBITDA loss of $12.3M (vs. an $18.0M loss in the prior year) came in ahead of Street expectations for a $14.6M loss. Total cannabis kg equivalents sold also surged 105% year-over-year to 11,430 kgs.

Notably, Q2 International Medical revenue increased 349% to $8.3M from $1.9M in the prior year, up from a 220% increase in Q1. Revenue growth for the other cannabis segments was as follows: Canada Medical +65%, Adult Use +17%, and Bulk -94%. (See TLRY stock analysis on TipRanks).

Following the results Oppenheimer analyst Rupesh Parikh reiterated his hold rating without a price target. “The company continues to drive strong growth in international medical, but the performance in Canada remains a key focal point for us going forward… [we] continue to model an adjusted EBITDA loss in Q4 primarily driven by the difficult competitive backdrop in Canada” he explained.

Overall the stock scores a cautious Hold analyst consensus with 6 recent hold ratings vs just 1 buy rating. The average analyst price target of $9 indicates upside potential of 9%, with shares currently down 53% year-to-date. As MKM Partners analyst Bill Kirk writes, “The sooner Tilray can derive the majority of its sales from Europe with product grown in Portugal, the better.”

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