Are Shares of Tilray (TLRY) a Buy?

: TLRY | Tilray, Inc. - Class 2  News, Ratings, and Charts

TLRY – This week Tilray announced that former Mattel and General Mills executive Katy Dickson has joined the companies leadership team.

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Although the environment is still uncertain for cannabis stocks going into 2020, some analysts and value hunters are predicting the worst is over.

Many of the large caps have been hovering close to 52-week lows but have shown some support recently after the MORE Act was passed by the House Judiciary Committee and now sits in the Senate. 

However, Tilray (TLRY) has remained weak.  The company was once the largest cannabis company by market cap in the world, hitting $300 per share at the height of the cannabis market last year. Yet it once again hit a fresh 52-week low of $18.50 on Tuesday. Investors are wondering when Tilray will be cheap enough to be considered a buy.

This week Tilray announced that former Mattel and General Mills executive Katy Dickson has joined the companies leadership team as Manitoba Harvest President. Her goal is to continue to pursue global growth for hemp foods. 

Tilray’s CEO Brendan Kennedy had some positive words regarding Katy’s arrival at Tilray, “We’re pleased to welcome Katy to our senior leadership team to build on the success of the Manitoba Harvest brand globally,” said Brendan. “Katy brings incredible experience connecting with global customers in the CPG and functional food categories. Her experience will be valuable as we work to gain access to new markets around the world and evolve our hemp food offerings to cater to varying customer needs and preferences.”

In late February Tilray acquired Manitoba harvest for $318 million in a cash and stock deal. Manitoba Harvest is the world’s largest hemp food manufacturer and a leader in the natural foods industry, spanning across 20 countries with about 16,000 retail stores. Manitoba Harvest recently launched a CBD line containing Broad Spectrum Hemp Extracts.

Tilray has done a great job expanding into the natural foods industry with the acquisition of Manitoba harvest but in order to reassure investors, they need to start focusing on what matters the most and right now that is the numbers.  Last quarter Tilray reported revenues of $51.1 million which was a substantial increase from the quarter in 2018 but they still reported a loss of $35.7 million. 

Tilray’s CEO has mentioned before that now is probably the best time to make acquisitions and expand throughout the sector, but we feel that profitability should be the company’s number one priority and once that’s achieved, then expansion can return to focus. We did want to point out that of its total revenue, $15.7 million came from hemp products which were the result of its acquisition of Manitoba Harvest, so the company is generating decent revenues from their acquisition.

If Tilray can continue to focus on what matters most (growing revenues and becoming profitable), shares of their stock could have a real shot at a nice recovery. The fact that Tilray has diversified its revenue streams into niches like hemp foods and the European market we see as a big bonus. When the competition heats up in the Canadian market and all of the cannabis companies are fighting for market share, Tilray will be able to enjoy a diversified stream of revenues. 

Therefore, owning shares of Tilray could be something to consider for the long-term investor.

 


TLRY shares were trading at $19.11 per share on Wednesday afternoon, down $0.44 (-2.25%). Year-to-date, TLRY has declined -72.91%, versus a 26.39% rise in the benchmark S&P 500 index during the same period.


About the Author: Aaron Missere


Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...


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