As a leading global cannabis-lifestyle and consumer packaged goods company, Tilray Inc. (NASDAQ: TLRY) is growing and shows no signs of stopping. With a recent expansion in Malta and a potential partnership on the way, TLRY is positioning itself as a leader in the cannabis industry. Following news of a scheduled House vote on legalizing cannabis, TLRY surged 50% and could be one of the promising CBD stocks this week.
TLRY Stock News
Despite the fact that the legal cannabis industry has been facing numerous challenges due to federal policy, it is expected to grow significantly in 2022. This is in part due to expanding state-by-state legalization as well as new sector-friendly policy changes in the banking sector. As of now, 18 states have legalized recreational marijuana and this trend is expected to continue – putting pressure on the federal government to legalize it nationally.
As the world’s largest cannabis producer by sales, TLRY has an unrivalled production platform that supports over 20 brands globally – including cannabis products, foods, and beverages. After backsliding throughout 2021 – showing a poor financial performance despite the industry’s uptick – TLRY’s earnings report on January 10th was widely anticipated but missed analysts’ revenue targets by 10%. The stock rallied based on a 20% jump in second-quarter revenue which resulted in net revenue of $155 million – up from $129 million the year before but down from last quarter’s $168 million.
This increase was mainly driven by 7% growth that pushed cannabis revenue to $58.8 million – along with a rise in revenues of TLRY’s operating businesses. The company also saw its net income increase to $6 million – a major increase from a net loss of $89 million the previous year. TLRY reported adjusted EBITDA of $13.8 million, up 8% from the previous quarter. Also, it’s the eleventh quarter in a row of positive adjusted EBITDA.
Recenty, TLRY announced its name change to Tilray Brands Inc., as a demonstration of the company’s evolution from a Canadian LP to a global consumer packaged goods powerhouse. As the company continues to grow and expand its product line further, it is well on its way to establish a portfolio of market leading, global lifestyle CPG brands and capitalize on the increase in legalization.
In addition to its financial growth, the company also had many cost synergies as a result of its Aphria-Tilray merger in 2021. Out of the $70 million achieved on a run-rate basis, the company saved operating costs amounting to almost $36 million with a projected $80 million synergy target by Q2 2022. TLRY expects cost synergies to continue taking place with projections of an additional $20 million in synergies in fiscal year 2023.
TLRY is already delivering on its expansion plans and is showing signs of progress across the EU. With its two state-of-the-art cultivation facilities in Portugal and Germany, TLRY is capitalizing on the powerful $1 billion market by providing GMP certified pharmaceutical-grade medical cannabis across the region.
In Germany – Europe’s largest and most profitable medical cannabis market – the company is the only government supplier of medical cannabis grown in-country and a 20% majority market share. Through its facility, TLRY has additional capacity to immediately support its entry into the recreational market upon cannabis legalization – which is currently under negotiation.
Given that TLRY is the only company with two EU GMP certified cannabis facilities in Europe, the company has enjoyed unparalleled production capability coupled with massive sales arrangements through major distribution channels in Germany, UK, and other key markets. Additionally, the company’s strong relationships with local governments as well as garnered trust from patients will enable TLRY to accelerate its growth within the region.
Aside from the EU, the company remains a market leader among Canada’s increasingly competitive and over-saturated cannabis market. This is in part due to the company’s solid brands portfolio across major consumer segments such as medical, wellness, innovative cannabis 2.0 products across concentrates, edibles, and drinks.
Meanwhile, to capitalize on the massive US market, TLRY’s operating businesses include SweetWater – the 11th largest craft brewer in the country and a leading lifestyle brand – as well as Manitoba Harvest – a pioneer in hemp, CBD and wellness products. Through these two businesses, TLRY has generated almost $100 million in revenue by investing in product innovation and acquisitions to enhance awareness and distribution. These efforts will position the company for a successful launch of THC-based products upon federal legalization in the US.
Irwin D. Simon – TLRY’s Chairman and CEO, has attributed the company’s recent success to their prominent portfolio of “high-quality and highly sought-after cannabis and lifestyle CPG brands.” He is bullish that these consistent expansions will enhance “presence in the fast-growing spirits sector while also providing an immediate contribution to earnings.” Simon highlights the importance of the company’s rebranding in this, saying: “these adjustments will enable us to aggressively recapture share when the market right-sizes.”
*Updated March 28th
As TLRY looks to expand its business globally, the company launched its medical cannabis products in Malta. TLRY’s products are now available in Maltese pharmacies to provide patients with its high quality medical cannabis products.
Considering the growing demand for medical cannabis in Malta, TLRY expanded its offered products in the nation by launching its EU GMP medical cannabis oil products. In this way, TLRY could capitalize on this demand by achieving major growth in revenues.
Further expanding its business, TLRY proposed a partnership with Hexo Corp. (NASDAQ:HEXO) to bring Canada’s top two cannabis producers together. Through this, both companies have the potential to grow their market positions as well as improving production efficiency.
According to this partnership, TLRY would acquire up to $211 million of HEXO’s convertible notes held by HT Investments. These notes have a conversion price of C$.90 per share – which would allow TLRY to acquire 37% of Hexo’s shares. Moreover, TLRY and HEXO will enter into definitive agreements regarding cultivation and processing services and establishing a JV. With this in mind, both companies believe the partnership will save them C$50 million due to the improved production efficiencies.
With this in mind, cannabis stocks have been gaining momentum lately following the House’s plans to hold a vote to federally legalize cannabis. Through this bill, cannabis would be removed from the list of federally controlled substances and a federal tax on cannabis products would be imposed. With the first House meeting to discuss the bill scheduled to be on March 28th, many investors are speculating that the bill will pass.
This comes after the Senate passed the Cannabidiol and Marihuana Research Expansion Act to promote cannabis research. The unanimously approved bill is expected to encourage the FDA to develop cannabis based medicines, in addition to allowing physicians to discuss the benefits and risks of cannabis with their patients.
Given the company’s proposed partnership with HEXO and the growing demand for cannabis products, TLRY is in the front seat to take advantage of the potential cannabis legislation. After surging 50% following the news of the scheduled vote, TLRY has the potential to be one of the CBD stocks to watch this week.
Media Sentiment
@AdnansArk expects TLRY stock to reach $10, time will tell if his prediction is correct.
Technical Analysis
Currently trading at $7.98, TLRY stock shows a main resistance at 8.19 as well as a secondary resistance at 8.58. Meanwhile, TLRY stock shows a main support at 7.39 and a secondary support at 6.98. Despite a major dip, accumulation has witnessed an uptick recently. The MACD is bearish after witnessing a crossover and the RSI is at 68 starting to cool off after being extremely overbought at 91.
In light of this, TLRY could continue dropping as the RSI cool off from the overbought territory due to profit-taking. It is worth noting that an Inverse Cup and Handle pattern is forming on the 5-minute chart. Given that there is a gap near the secondary support, TLRY could drop after the pattern is completed to fill it – which could be a good entry point for investors bullish on TLRY’s long-term potential.
After news of an upcoming House vote to legalize cannabis, TLRY stock had a major 50% surge as is the case with other CBD stocks. As a result, the drop in all indicators could be attributed to investors selling for gains. With CBD stocks trending at the moment, TLRY stock could break through its resistance and reach new highs if the bill passes.
TLRY Stock Forecast
As the company continues to expand globally and acquire more brands, TLRY could be positioned for major growth in 2022. With its recent expansion in Malta and a potential partnership with HEXO, TLRY is well-positioned to capitalize on the rapidly growing cannabis industry. Given that TLRY is already an international medical cannabis market leader and is the top market leader in both Germany and Canada, the company has so much room to grow as cannabis legalization continues to spread across the world. Considering that the cannabis legislation is expected to pass, TLRY is shaping to be one of the best CBD stocks.
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