Today, Tilray (NASDAQ:TLRY) (TSE:TLRY) stock plunged by 12.6% following a short-seller report from Kerrisdale Capital that gave the stock a US$0.89 price target, implying a 70% drop from last Friday’s close. The Canadian cannabis player was accused of relying on an unsustainable cycle of share dilutions to mask its fiscal health and maintain operations. In fact, Tilray filed a proxy after market close on September 15, seeking approval to increase its authorized common share count from 980 million to 1.208 billion.
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The report also alleged that Tilray’s aggressive diversification into the craft beer sector, including acquisitions of some Anheuser-Busch brands, appears ill-judged, given the declining sales and poor EBITDA margins of these new assets. Furthermore, it suggested that Tilray’s recent rally, along with U.S. cannabis stocks, was misguided, as potential DEA marijuana rescheduling would mainly benefit U.S.-based companies, leaving Tilray at a disadvantage.
Moreover, the report criticizes the company’s murky financial disclosures, particularly concerning stock payments to key partner Double Diamond Holdings, which it claims are being used to artificially bolster reported EBITDA and free cash flow.
Is TLRY Stock a Buy, According to Analysts?
According to analysts, TLRY stock comes in as a Moderate Buy based on two Buy and five Holds assigned in the past three months. The average TLRY stock price target of $2.47 implies 3.5% downside potential, nonetheless.
