Canadian cannabis producer Tilray (TLRY) is expanding its product base and improving its bottom line. With cannabis stocks hitting 52-week lows, is TLRY stock a bargain to buy now?
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Minnesota became the 23rd state to legalize recreational marijuana after Gov. Tim Walz signed the legalization bill on May 30. The new legislation goes into affect Aug. 1, and applies to adults 21 and older.
This follows Maryland’s new recreational legalization policy that begins on July 1, after voters approved recreational cannabis use by those 21 or older on Nov. 8.
Maryland will tax recreational pot at a 9% rate, while medical marijuana is tax-exempt.
In Congress, bipartisan Senate and House lawmakers refiled a much-anticipated bill on April 27 to free up banking services for the marijuana industry. Currently, most dispensaries deal in cash since cannabis is not legal at the federal level, and banks don’t want the risk associated with the schedule 1 drug.
At the same time, states collectively generated more than $15 billion in adult-use marijuana tax revenue from 2014 to 2022. Pot-legal states raked in about $3.8 billion in cannabis tax dollars in 2022 alone.
The Tilray Medical division expanded its certified medicinal cannabis products into the Czech Republic in April, adding to its list of over 20 countries served.
TLRY Stock Hits A Low
Tilray shares hit a 52-week low of 1.56 on June 9.
Shares plunged over 21% in heavy volume on May 26, after announcing it is offering $150 million of convertible senior notes to help pay down debt.
TLRY is trading well below its 50-day moving average, as the stock extends a downtrend. Its decline has been spectacular. Tilray went public in July 2018 at 17 a share and peaked exactly at 300 in September 2018. It’s now at penny-stock levels.
Tilray shares dropped over 37% this year so far, but fared better than competitor Canopy Growth (CGC) and worse than Cronos (CRON), which plummeted 68% and 31%, respectively.
New Products In Honor of 420 Celebration
Tilray announced its bestselling Canadian cannabis brand, Good Supply, introduced a range of new products for the April 20 unofficial cannabis holiday — including pre-rolls, flower, and vapes — available in select provinces across Canada.
Products included names such as Rocket Bomb 510 Vape Cartridge, Lava Fuel Whole Flower and Grandpa’s Stash Pre-Rolls and Whole Flower.
Other products to be introduced for summer include Frozen Watermelon 510 Vape Cartridge and Monkey Butter 14 x 0.5g Pre-Rolls.
CBD Tea On Tap, Montauk Craft Beers Off To The Races
Tilray cannabis wellness brand Solei, introduced its new teas infused with micro doses of CBD, CBN and THC formulas on May 11.
Tilray Brands subsidiary Montauk Brewing Company announced a partnership with both Belmont Park and Saratoga Race Course to offer Montauk brews for the 2023 racing season.
Montauk Brewing also sponsored Toast, a craft beer festival featuring 15 New York craft breweries, held on June 10.
The New York Mets’ Citi Field announced April 25 it opened two new Montauk Brewing-branded bars selling its craft beer.
Tilray subsidiary SweetWater Brewing Company launched its summertime SweetWater Spirits vodka cocktails in a can on May 30. SweetWater also launched summertime ales.
Earnings: Loss Expected To Get Smaller
Tilray posted an adjusted loss of 4 cents per share in its fiscal Q3 earnings release April 10. Sales dipped 4% from the prior year’s quarter, a slight improvement over the 7% and 9% declines in the prior two quarters.
The company also announced on April 10 it will acquire Hexo (HEXO) for $56 million through the issuance of TLRY common stock. The deal is expected to close in June.
“We are incredibly excited about our combined prospects moving forward with HEXO and expect a seamless integration of HEXO’s business into our efficient, built-to-last platform,” said Irwin D. Simon, Tilray Brands’ Chairman and CEO.
Tilray held onto its top spot in the Canadian cannabis market. Management reiterated an expectation to deliver positive free cash flow from operating segments in fiscal 2023.
Analysts forecast a 37 cent per share loss for its May-ended fiscal 2023, a marked improvement over the $1.10 loss in fiscal 2022. In addition, the fiscal 2024 forecast sees a smaller 16 cent loss per share.
Some States Climb On Board, Others Slow To Warm Up
Connecticut adult-use marijuana shops opened their doors for the first time on Jan. 10 for recreational and medical use. The shops are open to adults 21 and over.
Hundreds waited in line as New York opened its first recreational dispensary on Dec. 30 at 4:20 p.m.
Kentucky State Senate President Robert Stivers hinted that he may be open to approve limited use of medical marijuana for patients at the end of their lives, but remains skeptical of its effectiveness.
Missouri passed a law to legalize recreational use cannabis, after it passed on the Nov. 8 ballot. Marijuana companies will be able to deduct business expenses on their Missouri state tax returns for the first time, benefiting startup cannabis companies.
Virginia also passed legalization, but is not expected to have dispensaries until 2024.
Tilray’s Chief Strategy Officer and Head of International Business Denise Faltischek sees favorable cannabis regulation in Europe, but not until 2024.
Tilray Adds Another Brewery As It Waits For Federal Legalization
With the company not expecting U.S. legalization of cannabis on a federal level anytime soon, it is bolstering its alcoholic beverage presence for additional growth.
Tilray added to its collection of small-craft breweries, with its most recent acquisition of New York-based Montauk Brewing on Nov. 7, 2022. Montauk specializes in ales and seltzers sold at Target (TGT), Whole Foods, Trader Joe’s, Walmart (WMT), Costco (COST) and other stores.
TLRY Stock Fundamental Analysis
Earnings growth is a staple of top stocks. But the EPS Rating of TLRY stock stands around 51 out of 99. Other Canadian marijuana stocks have mediocre or weak profit ratings, as they continue to lose money.
Tilray’s Composite Rating is a dismal 6, according to MarketSmith analysis. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.
The company’s SMR Rating — which measures sales, margins and return on equity — is a suboptimal E.
Is TLRY Stock A Buy?
Shares of TLRY are not in a base or in buy range, so TLRY stock is not a buy right now.
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. Shares are trading below 2 a share. Institutional investors typically avoid low-priced stocks.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
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