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Tilray Stock: Increasing Profitability But Still Not a Buy
Stock Analysis & Ideas

Tilray Stock: Increasing Profitability But Still Not a Buy

Tilray’s (TLRY) domestic business is showing signs the struggle continues in an oversupplied Canadian cannabis market where prices have taken a tumble. However, the most positive aspect in the company’s recent quarterly report, according to Cantor analyst Pablo Zuanic, is the “continued strength in the international business.”

In F3Q22, the company generated revenue of $151.87 million, amounting to a 22.6% year-over-year increase, although the figure fell short of the $156.2 million the analysts were expecting.

In a market which saw a 5% downturn, recreational sales dropped by 12% quarter-over-quarter and medical declined by 11%. The company grew its share of vapes and pre-rolls in the Canada rec segment, but the overall share loss was mostly on account of an oversupplied market – particularly in the flower segment.

However, the company did manage to post a beat on the bottom-line as EPS of $0.09 came in some way above the -$0.08 the Street had expected. By next year, management is calling for positive cash generation, and stated that the end of FY24 target for $4 billion in sales remains as is.

But as noted above, the brightest spot is reserved for the strides made on the international front. Revenue in the segment was up sequentially by 15% and clocked in at almost $16 million, representing 29% of net cannabis sales compared to just 15% in the August quarter.

Tilray now has a footprint in 20 countries and boasts a 20% total market share in Germany. The company also highlighted its belief that “significant regulatory changes” are coming in the next two years in Europe, especially in Germany.

Overall, Zuanic expects the “growth momentum to continue.” While the analyst raised his price target on TRLY from $6.9 to $8.4, his rating stays Neutral (i.e., Hold) due to Tilray’s lofty valuation.

Most of Zuanic’s colleagues concur; based on 7 Holds, 3 Buys and 1 Sell, the stock has a Hold consensus rating; That said, the average price target is above Zuanic’ objective and at $10.63, could generate one-year returns of ~63%. (See Tilray stock forecast 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.

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