Investors who have waited patiently for Tilray Brands (TLRY) to make new highs have been rewarded. TLRY stock has surged more than 50% over the past thirty days, while climbing 18% in six months. The shares are up 14% year to date, besting the 9% rise in the S&P 500 index.
Expand the horizon of stock performance by twelve months and the picture is not as rosy. The shares have underperformed the broader index, rising just 5% compared to the S&P 500 index’s 27% rise. The Canadian cannabis company will report third quarter fiscal 2024 earnings results before the opening bell Tuesday. Ongoing discussions over federal legalization has yet to create a marketplace where Tilray can thrive, although state-level changes have injected some optimism.
Although the Canadian cannabis company continues to make financial and fundamental improvements, its long-term success closely hinges on legalization on the federal level. Tilray and other cannabis companies are highly dependent on the U.S. government to do two things: One is to legally reclassify marijuana, and/or Congress must pass the long-awaited SAFE Banking Act or similar legislation. The latter would open the cannabis industry to more investment opportunities.
While its management has expanded the company’s reach into international markets, investors are still waiting for the company to show it can compete effectively in the Canadian cannabis market where it has had to deal with not only slumping prices, but also competition from the black market. Investors are nonetheless waiting for the company to show it can consistently deliver on the bottom line. As such, the company's ability to move the business beyond the hope of the U.S. legalizing cannabis will be a key question on Tuesday's .
In the three months that ended March, Wall Street expect the company to report a per-share loss of 5 cents on revenue of $198.62 million. This compares to the year-ago quarter loss of 4 cents per share on revenue of $145.59 million. For the full year ending in August the loss is expected to be 22 cents per share, narrowing from $2.35 loss a year ago, while full-year revenue is expected to rise 27% year over year to $795.61 million.
The likelihood of federal legalization has taken a modest step in the right direction in the U.S. Meanwhile, last Tuesday, the Florida Supreme Court greenlit an initiative to legalize recreational marijuana in the state through a referendum on the November ballot. If passed in November, the measure will legalize recreational cannabis in the third-most populous U.S. state, making it legal for adults to possess of up to three ounces of cannabis as early as May 2025.
This will potentially transform the state's medical marijuana market, currently estimated to generate $2 billion in annual revenue. Tilray and other cannabis companies are highly dependent on these types of measures to pick up steam. In the meantime, the company must deliver on the business environment it currently operates in. In the second quarter, Tilray missed on both the top and bottom lines. Although Q2 revenue rose 34.5% year over year to $193.8 million, it missed estimates by $1.26 million.
Q2 adjusted loss of 7 cents per share also fell short of estimates by a penny. However, it wasn’t all bad. The company reported year-over-year growth in all business segments, logging the strongest revenue increase from the beverage alcohol business, rising from $21.4 million to $46.5 million. Cannabis revenue jumped from $49.9 million last year to $67.1 million this year.
In other words, progress is being made fundamentally. The main question for Tilray investors ahead of Q3 results is whether the company can capture a meaningful chunk of that market share if or when federal legalization law passes.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
Read Richard's Bio