Tilray (TLRY) 3rd Quarter Earnings: What to Expect

How high can medical marijuana company Tilray (TLRY) fly? The company is set to report third quarter fiscal 2018 earnings results after the closing bell Tuesday.

Ever since recreational marijuana officially became legal in areas like Canada, Tilray -- and for that matter, marijuana stocks in general -- have seen a significant boost in their valuations. And those gains were further catapulted by news that beverage giant Constellation Brands (STZ) was ready to pour some $4 billion into Canopy Growth (CGC), hoping to tap into the popularity of a budding cannabis industry leader.

Cannabis stocks, however, have since succumbed to rash of profit taking, as investors question the long-term viability of the market, which has had strong opponents over the past couple of years. The tides turned again following the last week’s election results, as pot stocks rallied following news that Michigan voters approved recreational marijuana legalization in their state, making Michigan the 10th state to permit recreational marijuana use.

Nevertheless, on Tuesday, Tilray must also erase doubt its valuation of $10 billion is deserved for a company projected to generate 2019 revenue of around $140 million.

In the three months that ended September, Wall Street expect Tilray to report a per-share loss of 12 cents on revenue of $10.12 million. This compares to the previous quarter when it reported a per-share loss of 17 cents on revenue of $9.74 million. For the full year, ending December, the loss is expected to be 46 cents per share on full-year revenue of $41.21 million.

In its fiscal second quarter, reported on August 28th, Tilray missed on the bottom line, reporting a loss of 17 cents per share, which was wider than the 9 cents analysts were looking for. However, it did beat on the top line. Revenue was strong, coming in at $9.74 million, up some 95% year over year, beating Street estimates by $73,000. The numbers sent the stock soaring the after-hours session, surging to its 52-week high of $300.00 per share, only to lose some more than 60% of its value since.

Bears continue to argue that valuation of cannabis stocks will have no choice but to trade commensurate to their fundamentals. That may be true. But as it stands, because of the results of last week’s election, there are now ten American states in which people over the age of 21 can — at their discretion — use marijuana recreationally. What’s more, the resignation of U.S. Attorney General Jeff Sessions, who was a strong opponent of its recreational use, was another catalyst.

It is unknown at this point whether Sessions' successor will adopt a more liberal view of cannabis. But for now, investors are cheering the fact there is one less opponent to a market where Tilray — which has seen its stock skyrocket some 700% above its IPO price level — can thrive. On Tuesday the company, which has seen its shares price reach a level that has attracted tons of bearish sentiment, must affirm that the optimism that has entered the sector in the last few days is justified.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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.

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