Tilray Stock Has Better Days Ahead

April 12, 2022

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By MarketBeat. Originally published at ValueWalk.

Medical and consumer cannabis producer Tilray (NASDAQ:TLRY) stock has been an abysmal performer as shares collapsed to a low of $4.78 from its high of $300 after its IPO in September of 2018. The speculation of federal marijuana legalization and profitability initially drove up shares, but the reality of neither occurring for three-years has caused shares to deflate. Incidentally, the Company surprised investors by reporting a profit in its latest earnings report as the pursuit of federal legalization receives another push. Tilray was successful in reaching its target $80 million in synergies from its Aphria merger five months ahead of schedule. The U.S. House of Representatives voted in favor of federal legalization on April 4, 2022. The bill will move to the U.S. Senate for a vote, where it’s unclear how it will resolve. Many analysts believe the bill is “dead on arrival”. Nonetheless, cannabis regulation is back in the spotlight. Despite the legalization momentum still gaining in states like Maryland, it’s the Federal legalization or decriminalization that will be push the needle. Speculators looking for a direct play on the legalization of cannabis in the U.S. can watch for opportunistic pullbacks in shares of Tilray.

Q1 2022 hedge fund letters, conferences and more

Q2 Fiscal 2022 Earnings Release

On April 6, 2022, Tilray reported a surprise adjusted earnings-per-share (EPS) profit of $0.09, beating consensus analyst estimates for EPS loss of (-$0.08), by $0.17. Revenues rose 22.6% year-over-year (YOY) to $151.9 million, missing estimates for $156.64 million. Tilray is the number one medical marijuana market share leader in Germany with a 20% market share and top line growth surpassing 4,000%. It maintained its position as having the lead market share in Canada. The Company achieved $76 million in cost synergies and on track to exceed the original $80 million plane ahead of schedule with an additional $20 million of synergies in fiscal 2023. Tilray CEO Irwin Simon commented, ““Our third quarter results reflect progress and momentum across all of our key business segments and geographies, setting the stage to achieve our target for $4B in revenue by the end of fiscal 2024.”

Conference Call Takeaways

CEO Simon highlighted the profitable quarter and 12^th consecutive quarter of positive adjusted EBITDA growth. He elaborated on the goal of reaching $4 billion in revenues by the conclusion of fiscal 2024. He underscored the Tilray and Aphria merger has made it a global CPG cannabis growth story powered by both organic and acquisition. The Company is the premier global supplier of high quality medical cannabis products serving patients in 20 countries. The European Union alone presents a $1 billion opportunity or 25% of its $4 billion objective which also incorporates best-in-class cannabis CPG brands platform. He commented on U.S. legalization, “And in the U.S., legalization would be a milestone for Tilray Brands and the industry. Given uncertainty as to actual legislative reform, we are pursuing the next best thing, optionality. Our investment in MedMen is the best example of this approach. And with our strong balance sheet, leadership experience, operating profitable CPG businesses and growing brands that consumers love, we see a clear path to additional acquisition opportunities across the U.S. and remain optimistic that recent House passes of the MORE Act will provide additional momentum for legalization.” Tilray plans to utilize its current strategy in the U.S. parlaying beverages (non-alcoholic and alcoholic), personal care, and related CBD products into THC products if legalized federally.

Tilray Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a more precision near-term perspective of the landscape for TLRY stock. The weekly rifle chart bottomed at $4.78 and staged a rally that peaked near the $9.15 Fibonacci (fib) level. This helped form the weekly market structure low (MSL) buy trigger above $8.66. The weekly rifle chart finally saw an uptrend develop as the weekly 5-period moving average (MA) at $6.63 crossed up through the 15-period MA at $6.37 driven by the weekly stochastic bounce towards the 40-band. The weekly upper Bollinger Bands (BBs) sit at $10.63 with the falling weekly 50-period MA at $11.21. The daily rifle chart uptrend fizzled out as a breakdown formed on the 5-period MA at $6.92 crossed under the 15-period MA at $7.10 towards the 50-period MA at $6.29. The daily lower BBs sit at $3.55. The stochastic has fallen through the 40-band. Risk tolerant investors can watch for opportunistic pullback price levels at the $6.45 fib, $6.05 fib, $5.81 fib, $5.36 fib, $5.09 fib, $4.78 fib, $4.50 fib, $4.05 fib, and the $3.66 fib level. Upside trajectories range from the $8.60 fib up towards the $13.74 fib level.

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