It’s safe to say that it has been a brutal summer for most cannabis stocks. We have seen a relentless selloff since the spring and prices continue to plunge. Recently the large-cap cannabis companies have led the selloff and that is a true indication that investors are dumping cannabis stocks left right and center. Like every high growth industry, sometimes it takes a complete market shakeup to really determine which companies can weather the storm and are in fact here to stay. Recently we have favored the large-cap cannabis stocks over smaller cap producers as they focused more so on international expansion and distribution networks as opposed to the Canadian market alone.
Tilray was once, for a very short period, the largest cannabis company in the world by market cap. On Wednesday, September 19th, 2018 Tilray reached an all-time high of $300 USD per share carrying a market capitalization of over 20 billion USD. Currently, Tilray trades for just $26 as of Tuesday, August the 27th 2019 hovering just a few cents off of its 52-week lows. Times have drastically changed, the hype has left, and valuations have come back down to reality. During these tough times, we need to constantly assess our strategy and keep our eyes out for companies that have sold off substantially and are sporting much more attractive valuations.
Tilray was one stock that we never touched, but now that its trading at just $26 per share, it could be time to take a look more closely at Tilray. Carrying a 2.59 Billion USD valuation at current prices, Tilray brought in over 45 million in revenue the past quarter which did, in fact, beat analyst expectations. They did, however, record a wider than expected loss of 35.1 million. The loss was due to expansion and investment efforts in Canada and Europe. I can’t help but agree with Tilray’s CEO Brendan Kennedy as he mentioned that this is still an opportune time to invest, although investors are becoming impatient and want to see profitability.
At these prices, Tilray has a lot going for itself. The company is set to introduce its first line of CBD products in the US during the second half of 2019. Tilray has agreed to supply authentic brands with CBD for their products and various brands like Nine West and Juicy Couture. Tilray also plans to tackle the Canadian infused beverage market through their partnership with Anheuser-Busch InBev, the world’s largest brewer, to study cannabis-based beverages. With Tilray growing sales in the Canadian market, and especially Europe, it’s nice to see the diversification of income streams and an international approach to their business.
What Tilray needs is more time to shine and prove to their investors that they can execute on all fronts and make that push towards profitability. Considering the CBD opportunity in America, potential U.S. federal legalization, the Canadian infused beverage market, and growth in international markets, we could say that Tilray is setting themselves up to capitalize on many opportunities. As patience grows thin, worries mount and markets get shaky, it’s a tough time to have faith, but the patient is usually rewarded and Tilray could be poised to make a very nice recovery when the market decides the doom and gloom is over.
TLRY shares were trading at $26.97 per share on Thursday morning, down $0.23 (-0.85%). Year-to-date, TLRY has declined -61.77%, versus a 18.00% 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...
