Canadian cannabis producer Tilray (TLRY) rolled out new high-potency limited edition weed products through its popular Good Supply brand. So is TLRY stock a buy now?
Tilray’s new high-octane products come in the Good Supply’s Jean Guy Badder, Pineapple Express Hash Bats and Orange Frost Live Resin brands. Tilray’s Breckenridge Distillery partnered with the Denver Broncos to launch two limited-edition Mile High Bourbon Blends.
The Tilray Medical brand launched new products containing THC and CBD. The medical division rolled out an app program called CannaPoints to help patients manage their medical cannabis plan.
Tilray’s newly-acquired HEXO Corp. will introduce a new product line with former boxer Mike Tyson. The brand named TYSON 2.0, includes a full range of flower, pre-rolls, edibles and vape products. The HEXO-produced lines are set to launch in Canada in the fall of 2022.
Will German Legalization Spark Turnaround?
Germany is moving closer to national legalization of adult-use cannabis. Tilray initiated policy discussions with German regulators to create legislation for recreational use of cannabis.
German Drug Commissioner Burkhard Blienert presented the proposal to the German government, with a draft of the bill expected to be presented in upcoming months. Tilray has offered its experience and expertise on research, product quality, supply management and education to be the trusted partner with the German government.
Germany’s adult-use cannabis market is an estimated $12.6 billion. Cantor Fitzgerald analyst Pablo Zuanic said Tilray and Aurora Cannabis (ACB) rank as the best-positioned companies to benefit from the potential market among the pot stocks he covers. Fitzgerald has a neutral rating on TLRY stock.
Tilray and Aurora both have production facilities in Germany for medical-use cannabis.
TLRY Deals See Millions in Cost Savings
In July, Tilray completed the expected deal acquiring fellow cannabis producer HEXO.
“We are excited to close on this strategic transaction and alliance with HEXO, which is expected to provide several financial and commercial benefits, including substantial cost-savings synergies, increased strength in product innovation to capitalize on for market opportunities in Canada and internationally, along with the U.S., upon federal legalization,” says Chairman and CEO Irwin D. Simon.
HEXO’s President and CEO Charlie Bowman, says “Closing this transaction with Tilray will provide HEXO with the financial flexibility needed to accelerate our operational turnaround and put us on the path to profitable growth. We are confident that the savings and production efficiencies we are able to realize between the two companies will reset the industry.”
Both companies see operational and production efficiencies in cultivation, processing services, and procurement. The HEXO deal expects to generate an additional $80 million shared savings in the next two years.
Tilray and Aphria merged on May 3, 2021, creating the world’s largest cannabis company by revenue. TLRY sees $100 million of cost savings through synergies of its merger by the end of fiscal 2023.
TLRY Stock Fundamental Analysis
Earnings growth is a staple of top stocks. But the EPS Rating of TLRY stock stands around 30 out of 99. The EPS Rating is a gauge of a company’s profit growth in the long and short term. Other Canadian marijuana stocks have mediocre or weak profit ratings, as they continue to lose money.
Tilray reported its fiscal Q4 2022 earnings on July 28. Sales grew 8%, a slowdown from gains of 20% to 43% in the three previous quarters, according to MarketSmith. The Q4 bottom line was affected by a noncash accounting write-off of $378.2 million in the period.
Management expects to be free-cash flow positive in its operating business units in fiscal 2023, which ends next May.
TLRY Stock Ratings, Chart Analysis
The Composite Rating of TLRY stock is a woeful 11, according to MarketSmith analysis. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.
The company’s SMR Rating — or Sales+Margins+Return on Equity Rating — is a suboptimal D. The rating tallies the past three quarters of sales growth, pretax and after-tax profit margins and return on equity.
Tilray stock is trading below its 50-day moving average and is down 75% from its 52-week high. The stock has been trending down since February 2021, showing little ability to rebound. It is now trading around 3 a share. Institutional investors typically avoid low-priced stocks.
Is TLRY Stock A Buy?
Shares of Tilray are not in a base or in buy range. So TLRY stock is not a buy right now. Investors may have to wait until the share price climbs above 10 before buy opportunities emerge. Also, the stock market should be in a confirmed uptrend.
In addition, look for Tilray’s fundamentals to improve, including a return to profitability.
IBD advises investors to focus on stocks with stronger fundamentals that are moving into buy zones.
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