In the first earnings report since merging with fellow Canadian cannabis producer Aphria, Tilray’s (TLRY) FQ4 results resonated well with investors. Shares surged by 26% in the subsequent session, even though the company’s sales failed to meet the analysts’ target.
Tilray delivered revenue of $142.2 million, a 25.3% year-over-year increase, yet $88.1 million shy of the consensus estimate.
Nevertheless, investors chose to focus on the positives and Benchmark’s Mike Hickey highlights the company’s “strengthening profitability metrics.” These include $12 million in Adjusted EBITDA, $8 million net cash from operating activities, and $3 million positive free cash flow, which compares well with the $28.3 million of cash burnt in the same period a year ago. Net income of $33.6 million was also a big improvement on the net loss of $84.3 million in the same quarter last year, although that was largely due to the company recording $121.5 million from “non-operating income.”
“We are impressed with new TLRY’s operational scale advantages, meaningful step-up in profitability, and market share potential within the global cannabis market,” the analyst went on to say.
The company’s merger with Aphria has resulted in cost synergies of $35 million so far, and within 18 months of the deal’s close, – 16 months from now – the company expects this to rise to $80 million.
Tirlay management also thinks the worst of the pandemic’s impact might be over. The company estimates it lost around $100 million to Covid-led store closures. Due to the restrictions, over 800 Ontario-based stores remained closed until mid-June. Tilray estimates it currently holds a 16% share of the Canadian retail market, which by 2024 it hopes to increase to 30%. By then, the pot producer has also set its sights on generating $4 billion in revenue.
The company has also been eyeing the lucrative U.S. market, should the long hoped for federal legislation pass at some point. Tilray has pinpointed a $1 billion to $1.5 billion revenue opportunity south of the border, while in Europe it has “identified” a $1 billion revenue opportunity.
“We anticipate further acquisitions as TLRY scales in existing markets, enters new markets, and adds new product lines and brand creations,” Hickey summed up.
While Hickey also applauded the “better than expected” results, the analyst remains on the sidelines for now, with a Hold rating and no fixed price target in mind. (To watch Hickey’s track record, click here)
Wall Street analysts are evenly split when considering Tilray’s trajectory; based on 5 Buys and 6 Holds, the stock has a Moderate Buy consensus rating. Shares are expected to add ~30% of muscle over the coming months, given the average price target currently stands at $19.01. (See TLRY stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
