Getting a good understanding of the evolving legal landscape in the cannabis industry, from both recreational and medical use, has been tough for many investors. This is despite the fact that cannabis — in particular cannabidiol, also called CBD — has become a hot commodity.
In 2018, global cannabis revenue reached $12.2 billion. And revenue is expected to rise almost 40% to $17 billion in 2019. The legal cannabis industry is projected to grow between $50 billion and $75 billion in annual revenue in the next ten years, according to some estimates. Many public companies such as medical marijuana specialist Tilray (TLRY) are positioning themselves to capitalize on this new burgeoning industry, which has taken the markets by storm.
The company is set to report second quarter fiscal 2019 earnings results after the closing bell Tuesday. Needless to say, it has lot to prove. Investors are anxious to learn the extent to which Tilray, which has focused its efforts on high-margin medical marijuana patients, can grow its recreational revenue. While the company’s partnerships with Anheuser-Busch InBev (BUD) and Novartis (NVS) gives it a branding edge that’s not afforded to other cannabis peers, on Tuesday it needs to show that it can turn those relationships into profits.
In the three months that ended June, Wall Street expect the Canadian marijuana producer to report a per-share loss of 25 cents on revenue of $41.11 million. This compares to the year-ago quarter when it reported a per-share loss of 17 cents on revenue of $9.74 million. For the full year, ending in December, the loss is expected to be 99 cents per share, wider than last year’s loss of 78 cents, while full-year revenue of $176.1 million would rise 308% year over year.
Last quarter, Tilray’s revenue nearly tripled year over year. The company reported an adjusted net loss of 27 cents per share, matching consensus estimates. Revenue, meanwhile, crushed expectations coming in at $23 million, up 195% year over year, above consensus of $20.16 million. Even more impressive was the fact that Tilray’s Q1 revenue was impacted by excise taxes. When adjusting for those taxes, revenue still came in at $21.5 million, still better than expectations.
Tilray’s Q1 revenue was driven by a combination of factors, namely the Canadian adult-use recreational market, in which Tilray reported Q1 revenue of nearly $8 million. The company also booked revenue of $5.6 million in Q1 from its acquisition of hemp food manufacturer Manitoba Harvest, which it announced in February. On Tuesday analysts will want to see if Tilray can improve on these numbers.
Investor will also pay close attention to the company’s guidance, which will weigh heavily on the direction the stock, which has fallen 40% year to date and are down some 85% from its 52-week high. Figuring out which pot stocks will thrive in a growing industry is question investors are grappling with. But it’s tough to see how Tilray, by its strategic partnerships and growth initiatives, won’t have a significant long-term advantage over its peers.