The likelihood of cannabis rescheduling in the US this year has not significantly impacted Tilray Brands (NASDAQ:TLRY) stock, which has dropped by 27% year-to-date. However, the company’s big opportunity may lie outside the US market.
Tilray is the largest cannabis company globally in terms of total revenue, bolstered by its leading sales position beyond North America and its top spot in the Canadian recreational market, the only legal rec market among the G-7 countries.
This impressive standing has caught the attention of Pablo Zuanic, a cannabis analyst at Zuanic & Associates.
“Tilray is well-placed to be a leading player in the global cannabis industry, should benefit as markets outside North America begin to lift restrictions on their medical cannabis programs (MMJ),” Zuanic opined. “We see TLRY’s EV of near $2Bn (unrivalled outside the US, among publicly traded cannabis companies), ~$225Mn cash balance, valuation premium (cannabis stub trades at near 4x sales), and stock liquidity (NASDAQ listed), all as strategic assets in and out of themselves.”
In fact, these factors, along with “visionary leadership” and strategic M&A (which under CEO Irwin Simon, have seen revenues increase by more than tenfold from a base of $50 million), have enabled Tilray to develop a “diversified portfolio of complementary assets” in cannabis, alcoholic beverages in the U.S., hemp food, and pharma distribution in Germany. The future synergy between these various businesses will depend on regulatory changes and the potential blurring of lines between product types, such as hemp and THC drinks being distributed through beer channels in the U.S.
If that all sounds like an unequivocal endorsement, that’s not actually the case here. While Zuanic thinks in a “bull-case scenario,” a year from now the stock could be trading near $7 (that would represent a 321% increase from current levels), that optimistic view is not one Zuanic currently adheres to.
“While we are long term constructive on the stock,” Zuanic said, “near-term questions about the pace of international growth (TAM ramp, holding international share), ability to reverse rec share loss in Canada, potential US deal making, and ability to reach positive free cash flow, make us begin coverage at Neutral.”
That Neutral rating comes without a fixed price target from Zuanic. (To watch Zuanic’s track record, click here)
Other analysts do have a price target in mind for TLRY, and on average it lands at $2.04, representing a 21% premium over the current share price. On the rating front, most analysts agree with Zuanic; out of 9 recent ratings, 8 suggest a Hold, while only one recommends to Buy. This results in an overall consensus rating of Hold. (See TLRY stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
