Tilray: A “Rather Flat Print” Keeps This Analyst on the Sidelines

Tilray (TLRY) released its F1Q22 earnings last week, the first set of results based on a full quarter of consolidation following its merger with fellow Canadian cannabis producer Aphria. While the company stated it is on track to realize around $80 million of total cost synergies (having achieved cost-saving synergies amounting to $55 million already), the results were in no way an all-out success.

In fact, after scanning the print, Cannacord’s Matt Bottomley believes some model tweaking is in order, and not of the good kind.

“Following the quarter, we have made modest downward revisions to our near-term estimates,” the 5-star analyst said. “More notably, we also increased our Canadian recreational discount rate by ~2.0% (to 10.5%) to reflect continued challenges in the industry. Many LPs (including TLRY) have been stalled for growth as of late due to market saturation despite sales to end-users at the retail level continuing to progress.”

In the quarter, the company generated revenue of $168 million, which amounted to a quarter-over-quarter uptick of 18.1% and a year-over-year increase of 43%, although the figure came in shy of consensus expectations by $6 million. The company missed on the bottom-line too, with EPS of -$0.08, $0.03 worse off than the Street’s forecast.

In what Bottomley considers the “primary value driver for the company,” net cannabis revenue hit $70.4 million, more than a 30% sequential increase. “However,” the analyst noted, “FQ4/21 (the prior quarter) included only ~1 month of contribution from Tilray’s legacy cannabis business.” If this was adjusted for a full period, it points to FQ1/22 results which were “likely flat to modestly higher on an apples-to-apples basis.”

And while the company saw out the quarter with a “healthy” cash balance of roughly $376 million, cash flow from operations took a “step back.” Due to the payment of various fiscal year-end accruals, tax instalments and “increased receivables from provincial buyers” compared to the prior quarter, the figure came in at a loss of $93.2 million.

So, down to the nitty gritty, what does it all mean for investors? Bottomley reiterated a Hold rating on TLRY, while lowering his price target on the stock from $17 to $12. (To watch Bottomley’s track record, click here)

That’s Canaccord’s take, but what does the rest of the Street have in store for Tilray? Rating wise, about the same; based on 9 Holds vs. 3 Buys, the analyst consensus views this stock as a Hold. On where the share price is heading, Bottomley’s colleagues are more optimistic; the forecast calls for one-year gains of 48%, given the average price target stands at $15.04. (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.