Tilray, Inc. (NASDAQ: TLRY) is a global pioneer in the research, cultivation, production, and distribution of cannabis and cannabinoids currently serving tens of thousands of patients in twelve countries spanning five continents.
In the recent past, the company’s stock has shown an uptrend, led by its strong fundamentals and multiple positive catalysts/development’s in the recent past. It is one of those few companies which is well-positioned in both medical and recreational use cannabis sector, which makes it an attractive option to play the ongoing boom in the industry.
Furthermore, the cannabis industry itself remains very robust and TLRY is in the early stages of achieving its growth potential as the pace of legalization continues to accelerate around the world. Going forward, the demand for TLRY’products is expected to remain strong, and the company is committed to expanding its leadership in the global medical and adult-use cannabis markets.
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Building its brand and supply chain has become the company’s core focus, and it has built a premium, vertically-integrated business to pioneer the development of multiple markets around the globe. While this approach will continue to require initial investments in the short-term, but the same is expected to create a strong foundation and unique barriers to entry that can be leveraged and scaled in the medium to long-term.
Global Growth and diversification Strategy:
- On Nov. 13, 2018, TLRY reported third-quarter 2018 financial results for the quarter and nine months ended September 30, 2018. For the quarter ended September 30, 2018, the revenues rose 85.8% to $10.0(C$12.9) million in the third quarter and 78.9% to $27.6(C$35.5) million year-to-date. The management reported that Tilray medical cannabis products are now available to patients in 12 countries on five continents. The company Signed agreements to supply adult-use cannabis to consumers in eight Canadian provinces and territories and Completed successful $475.0(C$610.6) million Convertible Senior Notes offering in October.
- On Dec. 19, 2018, AB InBev and Tilray Announce Research Partnership Focused on Non-Alcohol THC and CBD Beverages. Both Tilray and AB InBev are expected to benefit from this transaction significantly.
- On Dec 18, 2018, the company announced today that it entered into a global framework agreement to collaborate with Sandoz AG, a global leader in generic pharmaceuticals and biosimilars and a part of Novartis group, to increase the availability of high-quality medical cannabis products across the world.
- On Dec 17th, Tilray Signs Letter of Intent for Hemp-Derived CBD from the U.S. and Canada.
- On Dec 14th, the company announced an investment in Québec-based cannabis producer, ROSE LifeScience Inc. (“ROSE”) and an exclusive sale, supply, distribution and marketing agreement between High Park Farms Ltd. (“High Park”), a wholly-owned subsidiary of Tilray, and ROSE. Tilray® Invests C$7.5M in Québec-based Cannabis Producer ROSE Lifescience Inc.
Analysts tracking the stock believes that TLRY is one of those handful companies that has achieved continuous growth and is well poised to capture the opportunities for growth in this industry. Companies such as Tilray with trusted brands and multinational supply chains will be the one that is likely to win not only with consumers but regulators as well.
Analyst ratings and target price: Per www.marketbeat.com, their average twelve-month price target is $135.6667, suggesting that the stock has a possible upside of 93.95%. The high price target for TLRY is $200.00, and the low-price target for TLRY is $35.00.
Below are the excerpts of recent analyst rating/Price targets on the company:
About the Company: Tilray is a global leader in medical cannabis research, cultivation, processing, and distribution. The company is pioneering the future of medical cannabis research, cultivation, processing and distribution globally, and intend to become a leader in the adult-use cannabis market in Canada.
The company produce medical cannabis in Canada and Europe and have supplied high-quality cannabis products to tens of thousands of patients in 12 countries spanning five continents through its subsidiaries in Australia, Canada, and Germany and agreements with established pharmaceutical distributors. In Canada, TLRY is also authorized to distribute certain products on a wholesale basis and to sell certain products directly to patients through its e-commerce platform or over the phone.
Notable deals in Pharma, alcohol and tobacco industries:
Other recent Activities/Announcements:
- Acquired Alef Biotechnology SpA for $3.9(C$5.0) million to allow Tilray to import, produce, and distribute Tilray branded medical cannabis products to Chile and to create a hub to distribute throughout Latin America.
- Imported 2:100 CBD oil to the United Kingdom.
- Received regulatory permits in Canada and Germany from exporting medical cannabis flower to Germany, making Tilray the first and only company to import both flower and oil medical cannabis products to the German market.
- Received regulatory approval from U.S. Government to import a medical cannabis study drug in capsule form for a clinical trial at the University of California San Diego Center for Medicinal Cannabis Research to examine the safety, tolerability, and efficacy of cannabis for Essential Tremor (ET)
- Exported CBD 100 medical cannabis, an oral solution of cannabinoid extract, from Canada to Australia to distribute to critically ill children in Australia who have intractable epilepsy through a compassionate access program.
- Signed agreement with Prince Edward Island to supply cannabis to adult-use consumers; eight agreements now signed in Canadian provinces and territories (British Columbia, Manitoba, Nova Scotia, Ontario, Quebec, the Yukon Territory, the Northwest Territories, and Prince Edward Island).
- High Park Farms™, a subsidiary of Tilray, received cannabis sales license from Health Canada, to supply and sell finished cannabis products within the Access to Cannabis for Medical Purposes Regulations, as well as sales in the adult-use market.
- Announces Pricing of $475(C$610.6) million of Convertible Senior Notes due in 2023 in a private placement in October 2018; Tilray intends to use the net proceeds for working capital, future acquisitions, and general corporate purposes, and to repay existing mortgage related to its facility in Nanaimo, British Columbia.
Industry Outlook: From an industry perspective, the legal cannabis industry has accelerated at a remarkable pace in the recent past. North American consumers spent $6.9 billion on legal cannabis products, up 34% from 2015 and by 2021, legal market sales are expected to surpass $21 billion. If we take that call, then that adds extreme value further.
- Revenue increased to $10.0(C$12.9) million, up 85.8% compared to the third quarter of last year. The increase in revenue was driven by increased patient demand, bulk sales to other Licensed Producers, and accelerated wholesale distribution in export markets.
- Total kilogram equivalents sold increased over two-fold to 1,613 kilograms from 684 kilograms in the prior year.
- Average net selling price per gram was $6.21(C$7.98) compared to $7.53(C$9.34) for the three months ended September 30, 2017. The reduction in 2018 compared to 2017 was primarily due to an increase in bulk sales as a percentage of total revenue.
- Net loss for the quarter was $18.7 million or $0.20 per share compared to $1.8 million or $0.02 per share for the third quarter of 2017. Net loss includes non-cash stock-based compensation charges of $11.2 million compared to a $35 thousand charged in the prior year period. Excluding non-cash compensation, net loss was $7.5 million or $0.08 per share. Adjusted EBITDA was a loss of $7.4 million compared to a loss of $1.7 million the third quarter last year. The increased net loss and Adjusted EBITDA declines were primarily due to the increase in operating expenses related to continued growth, expansion of international teams, and costs related to financing and the initial public offering (“IPO”).
Liquidity and financial flexibility: As of September 30, 2018, TLRT had cash and cash equivalents of $104,245 and short-term investments totaling $14,712, which were held for working capital purposes.
Key risk factors and potential stock drivers:
- Company’s ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements.
- Notwithstanding the recent boom, this is still a nascent stage space and only time would differentiate between real winners and laggards. Moreover, the long-term effect of the legalization of adult-use cannabis in Canada on the medical cannabis industry is unknown.
- As far as choosing an option with a relative advantage is concerned, TLRY is the preferred choice with upside potential.
- The inherent competition in the cannabis industry would continue to impinge the business risk profile of TLRY. Moreover, if cannabis becomes legal in the U.S., Canadian companies will have to compete with its American counterparts as well
- TLRY’ ability to acquire and incubate other cannabis companies as the sector consolidates
- On Friday, January 4th, 2019, TLRY closed at $69.95, on an above average volume of 2.7 million shares exchanging hands. Market capitalization is $6.517 billion. The current RSI is 36.76
- At $69.95, shares of TLRY are trading below its 50-day moving average (MA) at $95.79
The present support and resistance levels for the stock are at $66.85 & $73.45 respectively
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