Tilray Acquires Breckenridge Distillery; Shares Gain

Tilray, Inc. (TLRY), a Canadian pharmaceutical and cannabis company, revealed that it has acquired Breckenridge Distillery. Following the announcement, shares of the company closed 1.8% higher on Wednesday. 

Colorado-based Breckenridge, a distilled spirits platform, is recognized for its bourbon whiskey collection and innovative craft spirits portfolio. 

Together with a strong brand and accretive business, this strategic acquisition complements Tilray’s alcoholic beverage categories and enhances its infrastructure and footprint in the U.S. market. 

Benefits of the Acquisition 

As per the terms of the deal, Breckenridge Distillery will join Tilray’s SweetWater Brewing Company and diversify the company’s net revenue mix. Breckenridge Distillery is expected to be immediately accretive to EBITDA, with Breckenridge generating adjusted EBITDA margins of 25%.

Once federally permissible, the acquisition is likely to enable Tilray to commercialize new and innovative products through the development of non-alcoholic distilled spirits, including bourbon whisky.

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CEO Comments

The CEO of Tilray, Irwin D. Simon, said, “We see tremendous potential for Breckenridge and our existing SweetWater brand to complement each other, expanding their respective reach and driving further profitable growth in our beverage alcohol segment.”

“More generally, the Breckenridge Distillery transaction is consistent with Tilray’s strategy of leveraging our growing portfolio of U.S. CPG brands to launch THC-based product adjacencies upon federal legalization in the U.S. These significant, diversified revenue streams are key to delivering on our ultimate goal of industry leadership with $4 billion in revenue by the end of fiscal year 2024,” Simon added. 

Analysts Recommendation

On November 18, Barclays analyst Gaurav Jain initiated coverage of the stock with a Sell rating and a price target of $10 (4.06% upside potential).

Jain noted that leaf touching businesses remain federally illegal in the U.S., and legalization under the Biden administration remains unexpected.

Overall, the stock has a Hold consensus rating based on 2 Buys, 8 Holds, and 1 Sell. The average Tilray price target of $13.97 implies 45.37% upside potential. Shares have gained 21.3% over the past year.

Risk Analysis

According to the new TipRanks Risk Factors tool, Tilray stock is at risk mainly from three factors: Finance and Corporate, Legal and Regulatory, and Production, which contribute 33%, 23%, and 16%, respectively to the total 80 risks identified for the stock.

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