Tilray, Inc. (NASDAQ: TLRY)
Tilray Brands is an international beverage, wellness, and cannabis company that has recently made two major acquisitions that expanded its Canadian, US, and European cannabis footprint. It plans to become the world's leading cannabis business and make at least $4 billion in revenue before the end of its fiscal 2024. It currently has its headquarters in New York City, USA but has operations that span across at least 4 continents. With analysts from Jeffries having seen “signs of Canadian improvement”, the company has seen an increase in mentions by 74% encouraging investors to wonder what makes the stock so well hyped. Currently shares of Tilray, Inc. trade at $4.3.
There are multiple reasons why Tilray, Inc. should be on your radar at the moment, some of them are as follows.
Two major reasons for Tilray’s positive hype have been deals it signed recently. The first was in May 2021, when the company merged with Aphria (another cannabis company) in an all-stock deal. The merger is expected to save Tilray $100 million in cost synergies by the end of fiscal 2023.
The second deal took place in July 2022, and it was a strategic partnership with Hexo, a Canadian-based cannabis company that operates in the US and Europe, by effectively buying 50% of Hexo. Like the previous deal, this partnership is expected to save $80 million in cost synergies for both companies over the next two years.
The company’s current cost-saving campaign should yield $80 million in synergies over the next two years which means it could be free-cash-flow positive by the end of its 2023 fiscal year.
Factoring out foreign exchange effects, revenue rose 29% to $628 million in fiscal 2022.
Out of its 4 business areas, cannabis took the company's top total revenue spot, bringing in $301 million before excise taxes 43% of total receipts, and a 14% year-over-year bump.
International medical cannabis sales have recently increased by 482% as a result of the expansion in Europe which helped drive those gains in revenue.
Even with a large decline in its Canadian market share (its home market), Tilray still sold nearly $210 million in adult-use cannabis in FY 2022 and it seems like the international market could offset this temporary blip.
Tilray’s wellness sector revenue surged 922% to $59.6 million with a gross margin of 31%, and its beverage sector saw a 144% sales increase to $75 million with a gross margin of 55%.
In the near future, Tilray expects to earn $4 billion in revenue by 2024 as the US and Germany legalize adult-use cannabis.
Although the company seems to have bright prospects, there are drawbacks to purchasing the stock right now. Here are some of them.
Currently, the company isn't anywhere close to being profitable, and it has $415.9 million in cash against its trailing 12-month operating expenses of $345.3 million.
Tilray has a $434.1 million net loss. Management believes that $395 million of the loss came from impairments from inventory, goodwill, and other intangible assets largely related to the Aphria and Hexo transactions which mean this could only be temporary.
At the moment, its total debt is around $605.7 million, $92.6 million of which is due within a year which affects the company very immediately and may stunt its growth.
The biggest factor influencing where Tilray will be in late 2025 is the prospect of cannabis legalization in the U.S. and the E.U. If the U.S. legalizes recreational marijuana in the next three years, Tilray will have a path to start competing in the market more or less right away which means that although things are rocky at the moment, they will be looking up very soon. Shares of the company have declined by 44.8% since the start of 2022, which makes it the perfect time to purchase the stock while prices are down.
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