Cannabis Investors: Is Tilray Stock a Good Buy Right Now?
November 05 2021 - 6:36AM
Finscreener.org
Tilray (NASDAQ: TLRY)
stock has dropped over 34% in market value from May 2021, soon
after the merger with Aphria went through. Shares of the Canadian
cannabis giant are currently trading at $10.80, valuing the company
at a market cap of $5 billion. Let’s see if
Tilray is poised
to outpace the broader markets going
forward or if it will continue to disappoint investors.
Tilray has lofty ambitions
Tilray has made it clear that it
wants to hit $4 billion in revenue by the middle of calendar year
2024. Considering that its revenue for Q1 of fiscal 2022, ended
August 31, 2021 was just $168 million, it could seem like a tall
task.
The company has brought in Blair
MacNeil from Bacardi to expand its presence across Canada and aim
for a 30% market share by the end of fiscal 2024. During the Q1
2022
earnings call, Tilray said that it has a 16% share in the
Canadian retail market.
However, expanding its market
only in Canada might not be enough to hit the $4 billion target.
Tilray has been making inroads south of its border, anticipating
federal legalization of marijuana in the U.S. It acquired the
majority of MedMenU+02019s senior secured convertible note, giving
Tilray the option to buy a large equity stake in the former. MedMen
has around 25 retail locations in the U.S., including major markets
like Los Angeles and Las Vegas.
Back home in Canada, the number
of open stores after the lockdown has doubled from 600 to 1,200 at
the end of August 2021 which will be a key driver of top-line
growth for Tilray and peers.
Europe and other markets
On October 26, Tilray
announced that it was selected by the Luxembourg Ministry
of Health as a supplier of Good Manufacturing Practice (GMP)
certified medical cannabis products for the country’s medical
cannabis program. Now, Tilray can supply its cannabis products to
qualifying patients with “varying medical conditions”. These
products will be administered under the supervision of
physicians.
Tilray’s expansion is also based
on “two strong medical cannabis brands, large distribution network
in Germany through CC Pharma with access to 13,000-plus pharmacies
and end-to-end European Union GMP supply chain.” The company also
has a high-quality production facility in Portugal, and a new
cultivation and production facility in Germany, which announced its
first harvest in July 2021.
Tilray said that the EU,
including Germany, Poland, Italy, the UK, France, the Netherlands,
and Israel has the potential to be a multi-billion-dollar market.
Outside Europe, Tilray said Australia and New Zealand continue to
perform well and it sees additional opportunities in Argentina,
Colombia, Brazil, China and India.
Tilray will have to focus on acquisitions
In Canada, thanks to the
lockdown, a lot of retail stores were shut until mid-June. When you
take that into account, it might not be a misjudgment to say that
Tilray could have clocked revenues closer to $225 million - $250
million. However, that brings its annual revenue estimate to $1
billion.
This means the company will have
to go down the inorganic path to hit its $4 billion revenue goal.
It is highly likely that Tilray will start eyeing acquisitions in
its home market first. According to multiple accounts, the Canadian
marijuana market doesn’t seem to be large enough for all the
companies that sprung up in the last decade. Investors should
expect a lot of consolidation to take place, and Tilray, with its
massive size, could end up merging quite a few companies into its
fold. Its large size gives it better and easier access to capital
than its peers.
Tilray is a company that has the
cash and the experience to withstand tough markets, making it one
of the safest bets among Canadian cannabis stocks.
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