Tilray Stock’s Tumble: A Buying Opportunity or a Cautionary Tale?

Stock Market

Tilray Brands (NASDAQ:TLRY) presents an intriguing opportunity, especially when looking at TLRY stock in the cannabis sector. Tilray has established itself as a pioneer in the global cannabis and consumer goods sector, with a relatively diverse product line. This Canada-based cannabis company has a presence in North America, Europe and Australia, with a focus on the Canadian cannabis market.

In 2023, Tilray faced financial ups and downs. For investors, its year-to-date drop of around 33% was disappointing. However, for those looking to put fresh capital to work, the picture isn’t as murky. Tilray did post a bright spot in its revenue, which grew by 15.5% to reach $177 million. However, the company’s bottom-line number did fall short of the expectations, with earnings per share missing by five cents this past quarter.

Let’s delve into recent news and updates on this company, and discuss whether TLRY stock is a buy here.

Recent TLRY News

Tilray, a major global cannabis and consumer goods company, celebrates five years of industry leadership in Canada. The company holds a 13.4% cannabis market share in its domestic market. Of course, this metric includes the recent acquisitions of Truss Beverage and HEXO, which bolster Tilray’s position in this market. Furthermore, the company hasn’t been shy about making significant progress in terms of partnerships, with the likes of the Canadian government and others. These partnerships are largely aimed at developing the industry, leading CEO Irwin D. Simon to express pride in these achievements.

Over the past five years, Tilray achieved significant milestones in the Canadian cannabis sector. These include the acquisition of Broken Coast in 2018, the Tilray and Aphria merger in 2021, creating Tilray Brands, and the expansion of its medical cannabis portfolio with four distinct medical brands.

For those who believe in the consolidation story in this sector, this is certainly a stock to watch.

So-So Fundamentals

Tilray’s August quarter report saw higher-than-expected losses but increased sales. Thus, it was a mixed bag, with something for everything in this report.

Tilray did report a 10-cent loss per share, missing FactSet’s forecast of 7 cents. Sales rose by 15%, trailing the previous quarter’s 20% increase but showing marked improvement from a 4% drop two quarters ago. Tilray’s cannabis net revenue increased by 20%, and beverage alcohol revenue increased by 17%.

The Canadian cannabis player upheld its fiscal 2024 adjusted EBITDA target of $68-78 million, showing 11-27% growth from fiscal 2023. It maintained its top position in the Canadian cannabis market, expanding market share from 8.1% to 13.4% in a single quarter. Analysts project a 23-cent per share loss for full-year fiscal 2024, improving to 9 cents in 2025 according to MarketSmith.

Growth has Slowed

That’s not to say the growth trajectory Tilray has been on is one that hasn’t proven to be volatile. The company’s recent expansion into other verticals, including alcoholic beverages and other cannabis-related products could result in some choppiness in terms of results, depending on how this R&D spending flows through in terms of earnings. Investors will certainly be paying closer attention to the company’s top-line numbers, relative to its losses, as Tilray remains a company that continues to invest for the future.

The question is whether investors are still willing to absorb these losses. Indeed, Tilray has been active in recent years, expanding its presence in fast-growing markets, including craft beers and cannabis-infused beverages. The company recently finalized its purchase of eight beer brands from Anheuser-Busch (NYSE:BUD), becoming the fifth largest in the U.S. craft beer market.

However, when the overall business will ultimately turn profitable is the key question on the minds of many investors, and one of the reasons TLRY stock is down so considerably from its peak.

Is TLRY It A Buy?

As previously noted in my cannabis stock article, TLRY stock represents (to me) an investment that carries significant risk. With uncertainty likely to remain around U.S. legalization, avoiding cannabis producers, including Tilray, may be a safer choice for most investors. Indeed, I think it’s simply prudent to steer clear of this stock until it achieves sustained profitability. That said, there’s always the possibility for near-term surges on any sort of positive regulation-related news. Thus, for traders, maybe there’s a reason to get in and out of this name, particularly at these lower levels.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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