TLRY: Tilray Closes a Facility to Reduce Costs, is the Stock a Buy?

Despite a challenging economic environment, shares of Tilray (TLRY - Get Rating) have rallied almost 500% in just the past two months.

Yet, we believe this rally is questionable.

On May 11th, 2020, TLRY reported a first-quarter net loss of $184.1 million, which amounts to $1.73 a share, compared with a loss of $29.4 million, or 31 cents a share, a year ago.

However, this week TLRY did take a positive step to reign in their cash burn.

The company announced it will be closing its High Park Gardens facility which is a licensed cannabis greenhouse located in Leamington, Ontario. The closure of the facility is expected to yield $7.5 million in annual savings. High Park Gardens plans to shut down over the next six weeks. This is part of TLRY’s global cost-efficiency and restructuring plan to finally achieve profitability.

Brendan Kennedy, Tilray CEO said, “We are continuously evaluating the evolving needs of our business, against a challenging industry backdrop, to ensure we’re in the best position to produce world-class products and deliver positive results for our stakeholders. We are very confident our existing operations team will continue to serve our valued patients and customers with no interruption. On behalf of myself, the rest of our executive team, and our colleagues across the organization, I’d like to extend my sincere gratitude to the team at High Park Gardens for their contributions to Tilray and High Park. The decision to close a facility is never easy but we are confident that this will immediately put Tilray in a better position to achieve our goals of driving revenues across our core businesses and working towards positive adjusted EBITDA by the end of 2020. We are very confident our existing operations team will continue to serve our valued patients and customers with no interruption. On behalf of myself, the rest of our executive team, and our colleagues across the organization, I’d like to extend my sincere gratitude to the team at High Park Gardens for their contributions to Tilray and High Park.”

Their High Park Farms and High Park London facilities remain open and the core driver for the company’s growth plan when addressing the Canadian legal cannabis market.

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Shutting down High Park Gardens shows how aggressively the large-cap licensed producers have been forced to scale back operations, cut expenses, and readjust to the current market.

Though this closure is a step in the right direction, it’s our belief that TLRY isn’t out of the woods by a long shot. In 2019 the company lost $321.2 million and burned through $258.1 million in cash from its day-to-day operating activities. Presently, TLRY has only $96.8 million cash on their books. So investors, please tread cautiously in this stock.

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TLRY shares were trading at $10.57 per share on Thursday afternoon, down $0.08 (-0.75%). Year-to-date, TLRY has declined -38.30%, versus a -4.37% 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...