Canadian cannabis producer Tilray (TLRY) is expanding its product base and improving its profits. Is TLRY stock a bargain to buy now as cannabis stocks hit 52-week lows?
Minnesota became the 23rd state to legalize recreational marijuana after Governor Tim Walz signed the legalization bill into law on May 30. The new legislation goes into effect on August 1 and applies to adults aged 21 and older.
This follows Maryland’s new recreational legalization policy that goes into effect July 1, after voters approved recreational cannabis use by those 21 or older on November 8.
Maryland will tax recreational weed at a rate of 9%, while medical marijuana is tax-free.
In Congress, bipartisan legislators from the Senate and House on April 27 resubmitted a long-awaited bill to free up banking services for the marijuana industry. Currently, most pharmacies deal in cash, since cannabis is not legal at the federal level and banks don’t want the risk of the schedule 1 drug.
At the same time, between 2014 and 2022, states collectively generated more than $15 billion in adult marijuana tax revenue. Pot-legal states collected about $3.8 billion in cannabis taxes in 2022 alone.
The Tilray Medical division expanded its certified medical cannabis products to the Czech Republic in April, adding to its list of more than 20 countries served.
TLRY stock hits rock bottom
Tilray shares hit a 52-week low of 1.56 on June 9.
Shares plummeted more than 21% in heavy volume on May 26, after announcing it is offering $150 million in senior convertible notes to pay down debt.
TLRY is trading well below its 50-day moving average as the stock continues a downtrend. Its decline has been spectacular. Tilray went public in July 2018 at 17 per share and peaked right at 300 in September 2018. It’s now at the penny-stock level.
Tilray shares are down more than 37% year-to-date but have outperformed the competition Canopy growth (CGC) and worse than Kronos (CRON), which plummeted 68% and 31% respectively.
New products in honor of 420 Celebration
Tilray has announced its best-selling Canadian cannabis brand, Good Supply, and introduced a range of new products for the April 20 unofficial cannabis holiday – including pre-rolls, flowers and vapes – available in select provinces across Canada.
Products include names such as Rocket Bomb 510 Vape Cartridge, Lava Fuel Whole Flower, and Grandpa’s Stash Pre-Rolls and Whole Flower.
Other products launching for the summer include Frozen Watermelon 510 Vape Cartridge and Monkey Butter 14 x 0.5g Pre-Rolls.
CBD teas on tap, craft beers from Montauk to the races
Tilray cannabis wellness brand Solei introduced its new teas infused with microdoses of CBD, CBN and THC formulas on May 11.
Tilray Brands subsidiary Montauk Brewing Company announced a partnership with both Belmont Park and Saratoga Race Course to offer Montauk brews for the 2023 racing season.
Montauk Brewing also sponsored Toast, a craft beer festival featuring 15 New York craft breweries, held June 10.
The New York Mets’ Citi Field announced on April 25 that it has opened two new Montauk Brewing-branded bars selling their craft beer.
Tilray subsidiary SweetWater Brewing Company launched its SweetWater Spirits vodka cocktails in a can for the summer on May 30. SweetWater also launched summer beers.
Income: loss is expected to narrow
Tilray posted an adjusted loss of 4 cents per share in its fiscal Q3 earnings release on April 10. Sales were down 4% year-over-year, a slight improvement from the 7% and 9% declines in the previous two quarters.
The company also announced on April 10 that it will acquire it hex (HEXO) for $56 million through the issuance of TLRY common stock. The deal is expected to close in June.
“We are incredibly excited about our combined outlook moving forward with HEXO and expect seamless integration of HEXO’s business into our efficient, sustainable platform,” said Irwin D. Simon, Chairman and CEO of Tilray Brands.
Tilray maintained its top spot in the Canadian cannabis market. Management reiterated its expectation to generate positive free cash flow from operating segments in fiscal 2023.
Analysts are forecasting a loss of 37 cents per share for fiscal 2023 ending May, a marked improvement from the $1.10 loss in fiscal 2022. In addition, the fiscal 2024 forecast sees a smaller loss of 16 cents per share.
Some states are climbing on board, others are slowly starting to warm up
Adult-use marijuana stores in Connecticut opened their doors for recreational and medical use for the first time on January 10. The shops are open to adults aged 21 and over.
Hundreds lined up as New York opened its first recreational dispensary at 4:20 p.m. on December 30
Kentucky Senate President Robert Stivers hinted that he may be open to approving limited use of medical marijuana for end-of-life patients, but remains skeptical of its effectiveness.
Missouri passed a law to legalize cannabis for recreational use after it was passed on Nov. 8. Marijuana businesses can deduct business expenses from their Missouri tax returns for the first time, benefiting cannabis startups.
Virginia has also been legalized, but is not expected to have pharmacies until 2024.
Tilray’s Chief Strategy Officer and Head of International Business Denise Faltischek sees favorable cannabis regulation in Europe, but not until 2024.
Tilray is adding another brewery while it waits for federal legalization
With the company not expecting U.S. legalization of cannabis at the federal level any time soon, it is bolstering its presence in alcoholic beverages for additional growth.
Tilray added to its collection of small craft breweries, most recently acquiring New York-based Montauk Brewing on Nov. 7, 2022. Montauk specializes in ales and seltzers sold at Goal (TGT), Whole Foods, Trader Joe’s, walmart (WMT), Costco (COST) and other stores.
TLRY Equity Fundamental Analysis
Earnings growth is a staple of top stocks. But TLRY stock’s EPS rating is around 51 out of 99. Other Canadian marijuana stocks have mediocre or weak earnings ratings as they continue to lose money.
Tilray’s Composite Rating is a dismal 6, according to MarketSmith’s analysis. IBD research says investors should focus on stocks with a composite rating of 90 or higher.
The company’s SMR rating, which measures sales, margins and return on equity, is a suboptimal E.
Is TLRY Stock a buy?
Shares of TLRY are not in a base or buy range, so TLRY shares are not a buy right now.
In addition, look for Tilray’s fundamentals to improve, including a return to profitability.
IBD advises investors to focus on stocks with stronger fundamentals moving into buy zones. Stocks trade below 2 per share. Institutional investors generally avoid low-priced stocks.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKönig.
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