The market evidently liked Tilray’s (TLRY) November quarter results, sending shares up by 13% in the subsequent session, despite a mixed report.
Assessing the display, Cantor’s Pablo Zuanic sees both positive and less encouraging metrics in the print.
On a negative note, the situation in the domestic Canadian rec market remains difficult, with “market share erosion and wholesale destocking” leading to a big quarter-over-quarter decline in reported sales.
Total cannabis revenue dropped by 16% sequentially from 70.4 million in the August quarter to $58.8 million, coming in lower than the consensus estimate of $66.6 million and also below Zuanic’s call for $64.4 million. While the analyst was expecting a sequential 16% drop in rec sales, these fell by 29% – a worrying trend in a market that overall was up by 5%.
That said, while no guidance was provided, Tilray appears confident the rec business will see sequential growth in the February Quarter. “In the short term,” notes Zuanic, “Price cuts in pre-rolls and vape (which started during the Nov quarter) should drive growth (the company has not disclosed the magnitude of the cuts, but we understand its own vape prices now are more in-line with Auxly).”
However, maybe of more significance, the company is making headway in the international space. Zuanic is “positively impressed” with the export business’ sequential growth.
Sales climbed QoQ from $10.3 million to $13.7 million, with $7.8 million in sales from markets outside EMEA. The company now sells product to 20 different countries, including the key market of Germany, where Tilray holds the #1 position in the medical segment, boasting a ~20% share.
“As European countries start to legalize cannabis in the next few years (Germany by late 2023?),” says Zuanic, “We believe TLRY is well-placed given its production and distribution infrastructure, and established brands (especially in med tinctures).”
All in all, Zuanic sticks with a Neutral (i.e., Hold) rating on TLRY shares, while cutting the price target to $6.9 (from $7.4), suggesting shares will trend south 8% over the coming months. (To watch Zuanic’s track record, click here)
If we step back and look at the bigger picture, we can see that the Street’s take offers an interesting paradox; the stock currently boasts a Hold consensus rating, based in 8 Holds and 2 Buys and Sells, each. However, there’s some nice gains projected here; at $27.33, the average target suggests shares will rise ~41% in the year ahead. It will be interesting to see whether the analysts upgrade their ratings or lower price targets over the coming months. (See Tilray stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
