A fair few challenges, such as overcapacity, intensified competition, and regulations, have led to a prolonged depression in cannabis stocks. However, positive changes in the regulatory environment and increasing acceptance of cannabis use worldwide may turn the tide. Thanks to recent progress like Germany’s legalization of recreational cannabis and proposed reclassification of cannabis as a Schedule III drug in the U.S., cannabis stocks such as Tilray Brands could be well-positioned for a comeback.
The company posted promising quarterly results, and recent expansion suggests further room to run. The stock is down 19% year-to-date and trades at a relative discount, making it an intriguing opportunity for value-oriented investors with a contrarian mindset.
Tilray’s Growing Portfolio of Brands
Tilray Brands is a global consumer packaged goods company with a diverse product portfolio that includes beverages, cannabis, and wellness products. Its cannabis brands cater to both adult-use and medical cannabis, with offerings like whole flowers, pre-rolls, vapes, oils, and THC-infused drinks. Additionally, it has wellness products ranging from hemp-based food products to CBD-infused beverages.
The company recently secured a trading license in Germany for its Aphria RX subsidiary, which already had a cultivation license. This license allows Tilray to sell and distribute medical cannabis products across Germany, solidifying its foothold in the local cannabis market. The Cannabis Act in Germany, which reclassified cannabis as non-narcotic, has expanded its market opportunity.
Since the implementation, Tilray has seen a 65% increase in sales. With cultivation facilities in Germany and Portugal, Tilray is in a solid position to consistently supply the market with high-quality medical cannabis. The European market presents a significant opportunity for the company, potentially representing a $45 billion medical market.
Furthermore, Tilray has actively acquired beverage companies, including craft beers, spirits, ready-to-drink cocktails, ciders, energy drinks, and non-alcoholic beverages. It is the fifth-largest craft brewer in the U.S. and has an extensive distribution network.
Tilray’s Recent Financial Results
The company released its Q4 2024 results, surpassing analysts’ expectations on both top-and-bottom-lines. Net revenue increased 25% year-over-year, rising from $184.2 million to $229.9 million, beating analysts’ projections of $227.07 million. The beverage-alcohol division particularly excelled, with a 137% increase in revenue and a gross profit rise of 146%, thanks to new product innovations and contributions from recent acquisitions. The cannabis division saw revenue growth of 12% but decreased gross profit due to the conclusion of the HEXO advisory services agreement. Meanwhile, distribution revenue dipped a bit due to management’s focus on discontinuing less profitable product lines, but wellness saw a modest 6% gain in revenue.
The company’s net loss significantly decreased from $119.8 million in the same quarter the previous year to $15.4 million, primarily due to non-cash expenses. Earnings per share (EPS) came in at $0.04, well above the anticipated -$0.02.
What Is the Price Target for TLRY Stock?
The stock is quite volatile, with a beta of 1.95, and has been on a downward trend, shedding over 87% in the past three years. It trades at the low end of its 52-week price range of $1.60 – $3.40, though it demonstrates positive price momentum by trading above the 20-day (1.77) and 50-day (1.81) moving averages. With a P/S ratio of 1.75x, the stock appears to be trading at a relative discount to industry peers in the Specialty & Generic Drug Manufacturers industry, which sports an average P/S ratio of 2.28x.
Analysts following the company have been cautiously optimistic about the stock. For instance, TD Cowen analyst Robert Moskow recently reiterated a Buy rating on the shares with a price target of $2.50. He noted the company’s strong quarterly results and management’s projection of a significant increase in sales for FY25.
Tilray is rated a Moderate Buy overall, based on the recommendations and price targets assigned by three analysts. The average price target for TLRY stock is $2.35, representing a potential 26.34% upside from current levels.
Final Thoughts on Tilray
Amidst ongoing regulatory changes and an increased global acceptance of cannabis, Tilray Brands is carving out a compelling position in this blossoming market. Despite the less-than-stellar performance of its stock this year, Tilray’s recent expansion activities and promising quarterly results indicate a possible resurgence.
It has a diverse global footprint and a broad product portfolio that includes beverages, cannabis, and wellness products. The company is well-positioned for further growth potential. Given its current valuation, this stock presents an intriguing opportunity for investors looking for a value play in this market segment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
