Tilray (NASDAQ:TLRY) stock has been on a negative run for the past six months, dipping more than 50%. Hence, the recent pullback is quite intriguing.

However, it trades at 3.79 times forward sales, which is pricey despite Tilray’s encouraging performance in the past year.

Tilray is one of the largest marijuana producers in the world, with a whopping $513 million in reported revenues for fiscal 2021. Since its inception, the company has experienced immense growth through medicinal and recreational sales with the help of its extensive research facilities across North America and Europe.

This has been an eventful year for Tilray. With its merger with Aphria, it became an industry leader in the Canadian marijuana market. Moreover, it has done exceedingly well with its operating performance.

However, concerns remain regarding its expansion plans in the U.S. and its ability to achieve its lofty 2024 goals of $4 billion in revenues. Hence, it remains a relatively risky proposition at this time.

Solid First Quarter Results

Tilray recently reported its first-quarter (Q1) results for fiscal year 2022. Revenues for the quarter were $168 million, a 43% increase from Q1 2020.

Though its net loss widened to $34.6 million from $21.7 million in the previous year, the company boasted an EBITDA of $12.7 million, which marks 58% growth compared to the prior year quarter. Some of the growth was linked to its U.S.-based beverage and hemp food enterprises. However, the bulk of it was due to its Aphria merger.

Additionally, distribution sales have risen 40% and beverage alcohol sales have also grown 9% to $15.5 million.

Its wellness revenues also have increased 9% from the prior-year period, with adjusted gross margins at a stellar 43%. Moreover, the company is on track to deliver close to $80 million in cost savings from its Aphria merger.

A Tough Road Ahead

Tilray is looking at an annual run rate of over $513 million in revenues, but its management is hardly satisfied.

They plan to take the company top-line to $4 billion by 2024, which requires multiple elements. Namely, the company plans on expanding its market share in Canada, the U.S., and European markets.

Furthermore, Tilray will have to acquire several more companies in the Canadian market to get closer to the $4 billion mark. In terms of its expansion plans in the U.S., it has invested in multi-state operator MedMen Enterprises (OTCMKTS:MMNFF).

However, with a net loss of $336 million in 2021, things aren’t looking too bright. On top of that, it carries a massive debt load of $446.9 million, which is a major liability.

Legalization remains a big challenge in the U.S. and Europe. Moreover, establishing a foothold in these markets and doing it profitably is perhaps doubly difficult. At this stage, it looks unlikely that Tilray will scale up its operations at the intensity its management has outlined.

Bottom Line on TLRY Stock

Tilray has a lot going for it at this time, but it appears to be biting off more than it can chew.

The management’s seemingly insurmountable top-line expansion plans are likely to hurt the stock for the foreseeable future. Moreover, the company carries a huge debt load of over $400 million which questions its ability to carry on its operations effectively.

Expansion in the U.S. and European markets will be tough considering the established players already operating in those markets.

TLRY stock has shed a fair share of its value, but it’s still expensive as most of the growth premium has been baked into its price.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.