After grappling with various headwinds, including the pandemic and challenges related to legalization, the cannabis industry may be turning a corner. The proven medicinal properties of cannabis, its legalization, active research into genetic development and modification of the plant, and advancements in intellectual property rights have played a role in its resurgence.

Fueled by decriminalization and legal adoption of medical or recreational cannabis in several countries worldwide, the cannabis market is projected to grow at a 15.4% CAGR between 2022 and 2027. The recent optimism surrounding the industry is also evident from the 14.1% returns of the AdvisorShares Pure US Cannabis ETF (MSOS) over the past month.

However, it may not be wise to invest in underperforming marijuana stocks Tilray Brands, Inc. (TLRY - Get Rating) and Canopy Growth Corporation (CGC - Get Rating) as they don’t seem to have enough fundamental strength to capitalize on the industry tailwinds.

Tilray Brands, Inc. (TLRY - Get Rating)

Headquartered in Leamington, Canada, TLRY operates globally as a cannabis-lifestyle and consumer packaged goods company. It operates through four segments Cannabis Business; Distribution Business; Beverage Alcohol Business; and Wellness Business. 

For the fiscal 2023 first quarter ended August 31, 2022, TLRY’s net revenue decreased 8.8% year-over-year to $153.11 million. During the same period, the company’s gross profit declined 4.6% year-over-year to $48.61 million. Furthermore, the company’s adjusted net loss and loss per share came in at $44.96 million and $0.08, respectively.

Analysts expect TLRY to report a loss of $0.06 per share for the second quarter of fiscal 2022, ending November 30, 2022, compared to an EPS of $0.07 during the previous-year quarter. The company is expected to keep reporting losses during the current and the next fiscal years.

The stock has slumped 48.4% year-to-date to close the last trading session at $3.81.

TLRY’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

TLRY also has a grade of F for Value, Momentum, and Sentiment and a D for Stability and Quality.

In the F-rated Medical – Pharmaceuticals industry, it is ranked #159 of 163 stocks.

Click here to see the additional POWR Ratings for TLRY.

Canopy Growth Corporation (CGC - Get Rating)

CGC, headquartered in Smith Falls, Canada, produces, distributes, and sells cannabis and hemp-based products for recreational and medical purposes. The company primarily operates in Canada, the United States, and Germany through two segments: Global Cannabis and Other Consumer Products.

For the first quarter of the fiscal year 2023 ended June 30, CGC’s net revenue decreased 19.2% year-over-year to C$110.1 million ($81.64 million), driven partly by a decline in value flower sales in the Canadian recreational cannabis market.

The company’s operating loss widened 879.3% from the previous-year quarter to C$1.84 billion ($1.36 billion) due to a non-cash C$1,725 million ($1.28 billion) due to impairment in goodwill and non-cash fair value changes triggered as a result of the decrease in the company’s market capitalization in the same period.

In addition, CGC’s adjusted EBITDA loss widened 17.5% year-over-year to C$74.80 million ($55.46 million) during the quarter. The net quarterly loss attributable to CGC came in at C$ 2.08 billion ($1.54 billion), compared to a net income of C$392.42 million ($290.94 million).

Analysts expect CGC’s revenue for the fiscal year ending March 2023 to decrease 13.9% year-over-year to $352.11 million. The company’s net loss per share is expected to come in at $0.82 for the current year, compared to an EPS of $0.41 for the previous year.

Shares of CGC have declined 64.6% year-to-date to close the last trading session at $3.29.

CGC’s bleak prospects are reflected in its overall POWR Rating of F, which translates to a Strong Sell in our proprietary rating system. It also has a grade of F for Value, Momentum, and Stability and a D for Growth, Sentiment, and Quality.

CGC is ranked last out of 163 stocks in the same industry.

TLRY shares were trading at $3.80 per share on Monday morning, down $0.01 (-0.26%). Year-to-date, TLRY has declined -45.95%, versus a -19.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

More Resources for the Stocks in this Article