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Tilray (TLRY) Set to Report Q3 Results: Will the Stock Continue to Plunge?

Christopher Vargas

Tilray TLRY is set to report its third quarter results after the closing bell Tuesday, November 12. The company’s stock has plummeted in 2019 thus far, down over 67% as the cannabis industry as a whole has been hit with a variety of headwinds.

With all the setbacks that the marijuana industry has experienced, investors have been hesitant to jump into pot stocks despite the untapped potential that the emerging market has. As with any budding industry, it is difficult to gauge the trajectory of the young emerging companies. Let’s take a closer look at Tilray and where they might be headed in the near future. 

Tilray Bets on CBD and Eyes US Market

Tilray is taking its partnership with brewing giant Anheuser-Busch InBev BUD to the next level. The marijuana manufacturer and the beverage titan will be working together to produce and market non-alcoholic beverages containing cannabidiol (CBD). The CBD-infused drinks will go on sale in Canada once regulations allow, and potentially as early as December.

CBD is a non-psychoactive component of the cannabis plant. Unlike tetrahydrocannabinol (THC), CBD doesn't get people high. CBD has gained popularity because of its perceived health benefits like pain and stress relief. Analysts at market research company Brightfield Group forecast the CBD market to grow to nearly $24 billion by 2023, up from approximately $620 million in 2018.

Following the licensing backlog that Canada has experienced, investor worries grew about the timeline of the true emergence of the legal cannabis industry in the country. To mitigate the supply issues in Canada, the cannabis giant has set its sights on the US market. The Canadian cannabis producer announced that it has exported medical cannabis to the United States for a clinical study.

Tilray said this study will evaluate the use of medical cannabis in patients with breast cancer who suffer from taxane-induced peripheral neuropathy (TIPN). If the clinical trial succeeds then it would bode well for Tilray because of its focus on medical cannabis research and its partnership with pharmaceutical giant Novartis NVS.

The company also acquired the world's largest hemp food company, Manitoba Harvest, in its effort to further expand its operations into the US. The move represents an important opportunity given that hemp became legal at the federal level in December of last year. According to some estimates, the US hemp industry will mature into a $1.3 billion market, while others claim that sales of hemp-derived CBD products could reach $20 billion by 2024.

Takeaway

The company’s willingness to branch out its operations from Canada could bode well for the company and help the firm reach profitability. However, the cannabis producer’s international strategy hasn’t yet been vindicated, as Tilray's net losses have generally widened. Its adjusted net loss of $31.9 million for the second quarter was significantly worse than the loss of $12.8 million it recorded during the prior year's period.

Our Q3 consensus estimates project over a 390% revenue increase to $49.59 million while earnings plummet over 260% to a loss of $0.29 per share. Looking ahead to the company’s full fiscal 2019 figures, our estimates anticipate a top-line jump of 300.19% to $172.6 million and a bottom-line decline of 91.23% to a loss of $1.09 per share. As of now, Tilray sits at a Zacks Rank #3 (Hold).

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Novartis AG (NVS) : Free Stock Analysis Report
 
Anheuser-Busch InBev SA/NV (BUD) : Free Stock Analysis Report
 
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