Tilray (NYSE:TLRY) has taken its investors on a tumultuous ride that now sees the American cannabis company, with a license to produce the drug in Canada, with a wide range of options for its international expansion plans.
Since completing its initial public offering (IPO) in July 2018, stock for the British Columbia-based marijuana firm has seen extreme swings in value, one of the clearest signs of the volatility still seen in cannabis investing.
Tilray peaked at US$300 a share late in 2018 before finishing that same year at a price of US$75.15. A year after its IPO, the share price fell to US$46.98.
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The Tilray share price rise event was a bubble burst some stock market experts saw as inevitable.
Despite the massive drop, the company still boasts an impressive market cap of US$2.9 billion, one of the largest in the current cannabis landscape.
It’s now been almost a year since cannabis was legalized in Canada and the legalization of edible cannabis products in the country has been the talk of the market. Tilray has taken steps towards making a case to consumers to consider its products.
Across the border in the US cannabis still isn’t federally legal, but over 30 states have legalized the drug for medical purposes and through a series of acquisitions, partnerships and exports, Tilray has grown its reputation as a key supplier of medical cannabis products within the country.
The company has continued to be a major player in the space and worked since its IPO to establish itself as the cannabis industry matures, making it an interesting firm for investors to keep an eye on. Read on to learn about the potential benefits and risks of investing in Tilray.
Tilray’s advantages
Tilray’s IPO came out in 2018 but the company isn’t new. It’s been around since 2013, making it one of the original brands in the space. As such, it has a solid foundation in infrastructure and a broad set of supply deals — both old and new — for medical cannabis.
Tilray made news in 2018 when it became the first Canadian firm to gain approval from the US Drug Enforcement Administration to import medical cannabis for a clinical trial and since then, it has been the place to go for supplies of medical marijuana.
In fact, Tilray has supply deals with countries all over the world. The cannabis producer announced its subsidiary, Tilray Portugal Unipessoal, opened a new outdoor cultivation facility in the European nation. The company’s campus in Portugal serves as a hub for Tilray’s research and product development efforts in Europe.
Tilray’s presence in Portugal has made shipping cannabis across the continent easier and most recently, the company signed a deal with Cannamedical Pharma GmbH to export US$3.3 million worth in medical marijuana products into Germany, the first shipment from its Portugal campus to do so. As a farmer and exporter, Tilray has some experience and strategic relationships on its side.
Speaking of strategic relationships, Tilray’s relationship with PayPal founder Peter Thiel can’t be ignored. News that Thiel was investing in the cannabis space dates back to 2015, when Thiel’s company Founders Fund obtained a minority stake in Privateer Holdings, the same company that backs Tilray.
Since then, Tilray announced a definitive merger agreement with Privateer to extend the lock-up on, and provide issuance of up to 75 million Tilray common shares to Privateer’s equity holders, representing 77 percent of Tilray’s outstanding shares. Tilray survived the merger as a part of the deal.
Apart from medical cannabis, Tilray has also been forging its way into recreational marijuana. The firm entered the adult-use retail market when another of its wholly-owned subsidiaries, High Park Holdings, acquired cannabis retailer 420 Investments (FOUR20) in an all-share agreement valued at C$110 million. The deal brought with it the six brick-and-mortar cannabis stores FOUR20 has in Alberta.
Another of the firm’s acquisitions in 2019 was Manitoba Harvest, the world’s largest producer of hemp food products, according to Tilray. Manitoba Harvest distributes a variety of hemp-based consumer goods in over 16,000 stores across Canada and the US.
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Tilray’s potential setbacks
As mentioned, Tilray’s massive bubble burst was a shock to the market and the recent summer slump facing the industry has somewhat cooled investor excitement.
Despite being bolstered by recent acquisitions and an increase in its presence in the recreational cannabis market, Tilray still struggled after its massive drop.
The stock was raked across the coals in August when Count Vertical Group analyst Gordon Johnson slashed his price target for the company to more than 85 percent below its stock price at the time due to its most recent quarterly report.
The earnings report from Tilray’s second quarter in 2019 raised alarm bells with analysts and investors. Though the company reported US$45.9 million in total revenue, it also reported net losses at US$35.1 million, a big jump from the losses of US$12.8 million from the same period in 2018. Tilray also incurred US$33.6 million in sales costs.
Johnson called the results “an unmitigated disaster.”
The results also revealed Tilray’s sizeable debt of US$425.4 million from issuing convertible notes, the money from which was used to fund Tilray’s ongoing deal making, like its Manitoba Harvest acquisition.
Cowen analyst Vivien Azer also cut her price target to US$60 down from US$150 in September. In a note to investors, Cowen said Tilray had “been the most impacted by weak industry supply as its asset-light model was initially overly reliant on third-party supply,” adding a lack of novel cannabis products would also drag the reputation of the company down.
Investor takeaway
Now that share prices have dropped, investors can decide whether Tilray’s position in the market makes it a good choice to add to an investment portfolio.
Would you invest in Tilray? If you have, do you think it’s time to buy or sell? Is it one of the cannabis stocks to watch? What other companies in the marijuana business are stocks to buy?
Tell us in the comments below.
INNdepth
Want more details? Check out these articles for more INNdepth coverage.
- Are US Marijuana Stocks a Good Buy?
- US Cannabis Stocks
- States to Follow for US Cannabis Investments
- What You Need to Know About the Florida Cannabis Market
Want an overview of investing in cannabis stocks? Check Investing in the Cannabis Industry
This is an updated version of an article originally published by the Investing News Network in 2018.
Don’t forget to follow us @INN_Cannabis for real-time news updates!
Securities Disclosure: I, Danielle Edwards, hold investments in Canopy Growth and Aurora Cannabis.
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Keep reading to find out more cannabis highlights from the past five days.
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Analyst gives top pick as US market gains momentum
Vivien Azer, a managing director at Cowen (NASDAQ:COWN) who covers the cannabis space, told the Street she sees Green Thumb Industries (CSE:GTII,OTCQX:GTBIF) as the top cannabis stock right now.
“We think that Green Thumb has a really nice geographic mix and an attractive profitability margin,” Azer said, while also crediting Green Thumb with holding a license in New York, a market that is soon set to legalize recreational cannabis.
In the past, Azer has called for the cannabis industry to be worth US$40 billion.
When asked about the potential for legalization in the US, Azer pumped the breaks on any kind of sweeping policy taking over in the near future.
“We’re not calling for (legalization) in the 117th Congress, but we do think there is an opportunity to find bipartisan support for some improvement in the federal landscape,” she said.
Azer believes this type of policy change would allow cannabis companies in the US to obtain commercial banking and insurance services, and for these firms to secure listings on US-based senior exchanges.
Aphria CEO gives Tilray merger update
Aphria CEO Iriwn Simon went on CNBC’s Squawk on the Street show during 420 on Tuesday (April 20) to discuss all aspects of the cannabis business.
When asked about the recent voting delay from Tilray (NASDAQ:TLRY) shareholders, who need to make a decision on the company’s proposed merger with Aphria, the executive pushed back on the idea that the move is punt by investors, instead suggesting it is a necessary motivational manoeuver.
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“Today with retail shareholders out there and apathy in voting it’s going to take a little longer in regards to getting the vote done,” said Simon. “We will get the vote done, I’m very confident of that.”
Simon also pushed back against the idea that US-based multi-state operators have the advantage over Canadian producers when it comes to US market domination.
“When legalization does happen, the new Tilray will be ready to make a major entry into the US markets,” Simon told the Squawk on the Street audience.
While the US doesn’t have a federal legalization framework in place, multi-state operators have been able to capture market share by going after states with cannabis programs that allow for the sale of medical or even recreational products.
Cannabis company news
- Neptune Wellness Solutions (NASDAQ:NEPT,TSX:NEPT) issued an update to investors, confirming its business transition into an integrated consumer packaged goods company with plans for new CBD product development for the US market. “Neptune’s future will be focused on brand creation, accelerated organic growth complemented by new acquisitions with operational excellence as our foundation,” the company said.
- TerrAscend (CSE:TER,OTCQX:TRSSF) confirmed an acquisition deal for three dispensaries in Pennsylvania at a value of US$70 million. Jason Wild, executive chairman of the firm, identified Pennsylvania as a “key focus” for TerrAscend.
- Charlotte’s Web Holdings (TSX:CWEB,OTCQX:CWBHF) obtained Health Canada approval to use its proprietary hemp cultivars for outdoor cultivation. This move will help make Charlotte’s Web products more readily available in Canada.
- Bhang (CSE:BHNG,OTCQX:BHNGF) announced a delay in its financial report for the year ended December 31, 2020. The delay is being caused by the illness of an auditor, and the company now expects to file its report by the end of May.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
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Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos Group” or the “Company”) will hold its 2021 First Quarter Earnings Conference Call on Friday, May 7, 2021 at 8:30 a.m. EDT. Cronos Group’s senior management team will discuss the Company’s financial results and will be available for questions from the investment community after prepared remarks.
A live audio webcast of the earnings call will be available on the Company’s website at https://ir.thecronosgroup.com/events-presentations . The webcast of the call will be archived for replay on the Company’s website.
Participants may also listen via telephone by dialing (866) 795-2258 toll-free from the U.S. and Canada, or (409) 937-8902 if dialing from outside the U.S. and Canada (conference ID: 3586688). If joining by phone, please dial into the call 15 to 20 minutes prior to the start of the conference call to avoid any long hold times.
About Cronos Group Inc.
Cronos Group is an innovative global cannabinoid company with international production and distribution across five continents. Cronos Group is committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos Group is building an iconic brand portfolio. Cronos Group’s portfolio includes PEACE NATURALS ™, a global wellness platform, two adult-use brands, COVE ™ and Spinach ™, and three hemp-derived CBD brands, Lord Jones ™, Happy Dance ™ and PEACE+ ™. For more information about Cronos Group and its brands, please visit: www.thecronosgroup.com .
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A report just released in early April confirms that the cannabis beverage sector is thriving. According to this report from industry stalwart, Marijuana Business Daily while sales for vapes, pre-rolls and flower were lackluster, cannabis beverages shined:
“The beverage category continued to shine in the first quarter, leading all categories with sales growing 68.4% over the same period last year and 14.2% versus the fourth quarter of 2020. Most beverage categories experienced double-digit growth going into 2021.”
That’s a staggering increase. And from the looks of the numbers, it’s a trend, not a fad. Cannabis beverages are becoming an option for consumers as more and more hit shelves and brands get smarter about dosing, flavors, and what customers want. With the summer months fast approaching, sales have been picking up in key markets.
It’s a good time to be a health and wellness company, and the cannabis beverage space as the category leads the industry in growth. There are only a few companies leading the industry, including HEXO Cannabis Canopy Growth Corp, Keef Beverages (Private). BevCanna Enterprises Inc. (CSE:BEV, Q:BVNNF, FSE:7BC) has been making significant progress recently, and is now run by former Pepsi Co. executive, Melise Panetta, a veteran CPG and Cannabis executive with years of expertise selling and marketing some of the world’s most recognized beverage brands. It also added two veteran CPG (Consumer Packaged Goods) senior sales leaders to the organization.
BevCanna not only owns their own water source, a pristine alkaline spring water aquifer in British Columbia, but a world–class 40,000–square–foot, HACCP certified manufacturing facility which has a bottling capacity to produce up to 200M bottles annually. BevCanna’s extensive distribution network includes more than 3,000 points of retail distribution through its market-leading TRACE brand in Canada, a growing natural health and wellness e-commerce platform, Pure Therapy , its fully licensed Canadian cannabis manufacturing plant and distribution network, and a partnership with #1 U.S. cannabis beverage company Keef Brands .
Growing product line, world class leadership, and a growing sales team with experience, BevCanna is positioned to capitalize on the growing demand of Cannabis 3.0 beverages, and it’s looking to capture a piece of the market, which appears to be one of the hottest right now in the ever expanding cannabis industry.
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BioHarvest Sciences (CSE: BHSC) will be presenting at the Benzinga Cleantech Small Cap Conference taking place on April 22, 2021. We invite our shareholders and all interested parties to explore cleantech small cap investment opportunities through two days of networking, dealmaking and discovery.
Sign up to get a free spectator pass for the event: https://www.benzinga.com/events/small-cap/clean-tech/
About the Benzinga Cleantech Small Cap Conference
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