The markets might be rallying in 2023, but spare a thought for beleaguered cannabis stocks. The segment has had little to shout about this year, and no turnaround has materialized for many beaten-down names.
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But is change finally in the air for one marijuana stock? Shares of Tilray Brands (NASDAQ:TLRY), a Canadian cannabis firm that has designs on the U.S. and global markets, have been decimated, along with plenty of other cannabis stocks, but its latest quarterly readout was greeted enthusiastically. Tilray shares got a 27% boost over the past two trading sessions after its fiscal fourth quarter of 2023 results came in better than expected.
Revenue increased by 20% from the same period a year ago to $184.2 million, above the analysts’ expectations by $30.23 million. The company also saw its loss narrow by ~74% from the same period a year ago to $120 million and reported a consolidated adj. gross profit of $68.4 million, representing a ~37.1% margin – a sequential improvement of ~700 bps. Additionally, adj. EBITDA increased by ~93% year-over-year to $22 million.
For the coming fiscal year (ending May 31, 2024), the company is targeting adjusted EBITDA between $68 million to $78 million, amounting to y/y growth of 11% to 27%. Tilray also anticipates generating positive adjusted free cash flow.
Assessing the print, Canaccord analyst Matt Bottomley calls the quarter a “strong operational rebound to end the year.”
“Overall,” says Bottomley, “the quarter came in well ahead of consensus expectations as the company saw lofty sequential increases across all its operating segments. In addition, Tilray’s margins also saw notable sequential improvements as the company continues to progress on its various cost-saving initiatives that kicked off back in Q4/22.”
Accordingly, Bottomley reiterated a Buy rating on TLRY and maintained a $4.25 price target, suggesting the shares have room for plenty of growth – 99% more precisely – in the year ahead. (To watch Bottomley’s track record, click here)
On the other hand, while Stifel analyst W. Andrew Carter hails the momentum gained, he thinks the outlook will be hard to meet. “Against the stronger results, we view the initial FY24 EBITDA guidance ($68 million to $78 million) as aggressive given the requirement for 84% underlying EBITDA growth excluding a net headwind from the HEXO transaction (Tilray acquired its Canadian rival HEXO in June),” Carter explained. “4Q23 results suggest underlying momentum the company should build upon through 2024, but our outlook requires a stable performance for HEXO brands with double-digit underlying revenue growth.”
As such, Carter stays on the sidelines for now with a Hold (i.e., Neutral) rating and given what he now deems a “rich valuation,” lowers the price target from $2.25 to $1.90, suggesting shares are trading 11% above their fair value. (To watch Carter’s track record, click here)
Looking at the consensus breakdown, based on 2 Buys and 4 Holds, the analysts view TLRY stock as a Hold. The average price target stands at $2, implying ~6% downside from current levels. (See TLRY stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
