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Can Tilray’s Q2 Earnings Revive TLRY Stock?

Tom Taulli

Tilray (NASDAQ:TLRY) stock has certainly lost its mojo. After a splashy IPO last year, it has been a downward grind for TLRY. In 2019, Tilray stock is off about 40%. To put this performance into perspective, consider that Cronos Group (NASDAQ:CRON) is up 29% and Canopy Growth (NYSE:CGC) has gained 22%.

Regardless of all this, could TLRY get back into gear  soon? Is the sentiment towards it too negative?

Well, tomorrow after the market closes, when TLRY reports its second-quarter results,  we should get a great deal of Tilray news and some answers to the questions posed above.

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Analysts, on average,  expect Tilray’s revenues to come to $41.11 million, up from $9.7 million in the same period a year earlier. Analysts’ average estimate for Tilray’s bottom line is a loss of 25 cents a share.

In Q1 its revenue soared by 195.1% to $23 million and its loss came in at 32 cents a share.  So TLRY is certainly doing a pretty good job of riding the cannabis wave.


Q2 Highlights

In Q2, there has been quite a bit of Tilray news. Here’s a look at some of the highlights:

  • Tilray’s Portugal subsidiary signed an agreement with Esporão, which will give TLRY 20 hectares of outdoor cultivation space in Alentejo, Portugal. This is part of the company’s aggressive push to expand its opportunity in Europe.
  • The company announced that it would export a large amount of medical cannabis oral solutions from its Canadian factory to the United Kingdom.
  • TLRY signed a non-binding Letter of Intent with Privateer Holdings, which is the company’s largest shareholder. It allows for an extension of the lock-up on 75 million shares of Tilray stock — which represent 77% of those outstanding — as well as the orderly selling of those shares.
  • Tilray announced that it obtained approval from the U.S. government for two clinical trials that will test  the efficacy of cannabidiol, or CBD.The trials will focus on the efficacy of CBD  for treating alcohol-use disorder (AUD) and post-traumatic stress disorder (PTSD). No doubt, the markets for  AUD and  PTSD are large. More than 15 million suffer from AUD and more than 8 million have PTSD in the U.S. According to Dr. Bogenschutz of NYU School of Medicine, where the trials will be conducted:“Our study is the first to investigate the effects of CBD in the treatment of alcohol use disorder, and will provide important new information on its mechanisms of action and clinical benefits.”

The Bottom Line on TLRY

Gauging the earnings of a company like TLRY is certainly difficult. After all, the cannabis industry is still in the early phases. There are also wildcards like supply-chain problems in Canada as well as black-market activities.  But despite all this, the growth of the cannabis sector in general and TLRY in particular should remain strong.

Yet expect Tilray stock to continue to be volatile. In other words,investors should  be cautious about companies like Tilray. It’s also important to keep in mind that some nagging issues are affecting Tilray’s core business. For example, the company’s production is relatively small, as its Q1 sales came in at 3,012 kilograms. By comparison, CGC sold over 10,000 kilograms in Q1.

Finally, while other cannabis companies have snagged large investments from huge companies like Constellation Brands (NYSE:STZ) and Altria Group (NYSE:MO), Tilray has not yet attracted such a strategic investment. That is likely to hamper its progress, as size is critical for success in the cannabis industry. A strategic investor brings not just capital but also enhanced distribution capabilities, marketing acumen and product synergies. Investors who are interested in marijuana stocks should keep an eye on Tilray stock to see if the company can attract a large strategic investment.

But for now, there are probably better options for capitalizing on the market, such as CGC or CRON.

Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical IntroductionFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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