Canadian cannabis producer Tilray Brands (TLRY) is the Canadian market share leader and continues to add new products. With the stock dropping after the company’s recent earnings report and Germany decriminalizing cannabis for recreational use, is TLRY stock a bargain buy now?
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Tilray stock plunged after the company reported a larger loss and lower-than-expected fiscal third-quarter sales on April 9.
The cannabis company also lowered its fiscal 2024 forecast for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to a range of $60 million to $63 million from its previous target of $68 million to $78 million. In addition, Tilray said it “no longer expects to generate positive adjusted free cash flow for the full fiscal year 2024.”
Tilray Brands is preparing for live events and the launch of new products around April 20, to celebrate the 420 informal cannabis holiday. Special products range from THC enhanced beverages to pre-rolled items and vapes.
Another forward step for the industry came when Germany’s lower house of Parliament voted to legalize cannabis for limited recreational use on Feb. 23. The new law took effect April 1. The law allows adults to grow up to three plants for personal consumption and carry up to 25 grams of the plant.
TLRY Stock Sinks After Disappointing Results
Tilray stock rallied in the second half of March and reclaimed its 50-day and 200-day moving averages. But the cannabis stock dropped more than 20% in heavy volume after Tilray’s earnings report. The stock has fallen below its 200-day and 50-day lines since then. Tilray is still above its 52-week low of 1.50 marked on June 21.
Tilray’s IBD Relative Strength Rating fell to 39 out of 99.
The stock’s decline in the past three years has been spectacular. Tilray went public in July 2018 at 17 a share and peaked exactly at 300 in September 2018. It’s now back around 1.90 a share after the post-earnings decline.
TLRY stock pulled down competitors, including Canopy Growth (CGC) and Cronos Group (CRON) following its earnings report.
Sales Continue To Grow
Fiscal third-quarter net sales grew 29%, easing from a 34% increase in the prior quarter.
The company’s cannabis net revenue grew 33% vs. the year-ago quarter, but its alcoholic beverage net revenue growth of 165% stood out once again.
Analysts expect a fiscal 2024 loss of 26 cents per share, then a drop to a 10-cent loss in fiscal 2025, according to MarketSurge.
Tilray held on to its top spot in the Canadian cannabis market in the February-ended quarter with its 11.6% market share. It also leads in the German cannabis market.
Tilray Waits For More States To Legalize
So far, 24 states and Washington, D.C., have legalized recreational marijuana. Eleven states may look to legalize marijuana in 2024, with five seeking medical cannabis legalization and six others adult-use legalization.
Currently Florida, Idaho, Nebraska and South Dakota will try to put legalization questions before their voters in the November 2024 election, while the other seven states will leave it up to state legislatures.
With the company not expecting U.S. legalization of cannabis on a federal level anytime soon, it is bolstering its alcoholic beverage presence and developing new products for additional growth.
Its strategy is to leverage its brands, infrastructure, expertise and capabilities to drive market share. Tilray’s growth plan focuses on new products and new geographies.
TLRY Stock Fundamental Analysis
Earnings growth is a staple of top stocks. But Tilray’s EPS Rating dropped to a weak 16 following its latest quarterly report. Other Canadian marijuana stocks also have mediocre or weak profit ratings as they continue to lose money.
Tilray’s Composite Rating improved to 30 from a dismal 11 in February. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.
The company’s SMR Rating — which measures sales, profit margins and return on equity — is a suboptimal C.
Is TLRY Stock A Buy?
TLRY stock’s breakout from a cup base in late March and early April failed. It’s below the 2.54 buy point and the chart looks weak, so TLRY stock is not a buy right now.
In addition, Tilray’s fundamentals still need a lot of improvement, including a return to profitability.
IBD advises investors to focus on stocks with stronger fundamentals that are moving into buy zones. Institutional investors also typically avoid low-priced stocks like Tilray. And institutional buying accounts for the lion’s share of stock trades.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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