Tilray Brands (TLRY) recently reported mixed results for Q2 of the Fiscal year 2025, and the market has responded by selling off the stock, pushing it down 14.5% in the past few days. Despite reporting a net loss of $85 million, the company observed a 29% rise in gross profit, reaching $61 million. However, the company missed forecasted revenue for Q2 and revealed a plan to reduce the number of alcoholic beverage brands, decreasing full-year revenue by an estimated $20 million.
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Despite these changes, Tilray continues to lead in the cannabis business, particularly in Canada, and is well-positioned for the potential U.S. medical cannabis market upon its federal legalization. Its diversified portfolio of brands makes it a unique option for investors interested in gaining exposure to the beverage and cannabis markets. It trades at an attractive valuation, though investors might want to see signs of a turn to positive price momentum before entertaining establishing a position.
An Impressive Array of Brands
Tilray Brands is a global consumer packaged goods industry player boasting an impressive array of beverage, cannabis, and wellness brands. Its offerings include craft beers, spirits, cocktails, ciders, energy drinks, and non-alcoholic beverages. In the cannabis sector, Tilray offers adult-use and medical cannabis in various formats, such as whole flower, pre-rolls, vapes, concentrate oils, edibles, and more.
The company has become a key player in the American craft beer, spirits, and non-alcoholic drinks market. It holds the top rank as a craft supplier in Metro New York with Montauk Brewing and Blue Point Brewing, as well as in the Pacific Northwest with brands like 10 Barrel Brewing, Redhook, and Widmer Brothers Brewing. In the Southeast, it ranks second with SweetWater Brewing and Shock Top and fourth in Colorado. The second quarter saw an expansion in Shock Top distribution by 10% in the Southeast, adding 1,400 new placements for the brand.
Tilray introduced brands like Runner’s High Brewing Company and hemp-derived Delta-9 THC brands in the non-alcoholic sector. The company aims to capture a share of the worldwide $37 billion non-alcoholic craft beer market.
Tilray Solidifies Its Global Position
Additionally, Tilray leads the cannabis market and holds the top spot in the flower category in Canada. The company plans to expand beyond Canada and Europe, targeting the anticipated $8 billion to $10 billion U.S. medical cannabis market upon federal legalization.
Internationally, Tilray’s cannabis business grew by 25% over the previous year, with sales increases observed in Germany, Poland, the UK, and Italy. Germany’s new medical cannabis laws have mainly benefited the company, leading to a 55% increase in medical cannabis flower sales and a 24% increase in medical cannabis extracts. Tilray intends to leverage its leading position and assets to expand its international presence, particularly in Europe.
Finally, Tilray Wellness achieved double-digit growth in Q2 compared to the previous year, driven by strong sales and the expansion into wellness beverages. The company is exploring opportunities in the wellness segment, focusing on protein-rich products and healthy food options.
Growth Across All Business Segments
Tilray’s financial report for Q2 FY2025 shows a net revenue increase of 9% to $211 million, a slight miss against expected revenue by$5.33 million. Despite this, gross profit shows a significant increase of 29%, reaching $61 million and demonstrating growth across all business segments.
Beverage alcohol net revenue rose by 36% to $63 million, with the gross margin expanding to 40%. Cannabis net revenue was relatively stable at $66 million but had a higher gross margin of 35%. The distribution net revenue slightly increased to $68 million with a 12% gross margin. Finally, the wellness segment posted a 13% net revenue growth to $15 million and a gross margin improvement of 31%.
The gross margin increased to 29% compared to last year’s 24%. However, a net loss of $85 million was reported in the same quarter, which included $75 million in non-cash items and an additional $8 million in one-off non-recurring costs. This resulted in an adjusted net loss of $2 million compared to last year’s $3 million. Non-GAAP earnings per share (EPS) of -$0.10 beat consensus expectations by $0.07.
Downward Trending
The stock has been downward, shedding over 41% in the past year. It trades at the low end of its 52-week price range of $1.14 – $2.97 and shows ongoing negative price momentum as it trades below the major moving averages. The slide in price has driven it into discount territory, with its P/S ratio of 1.29x, sitting well below the healthcare sector average of 3.63x.
Analysts following the company have taken a cautious stance on TLRY stock. Based on the recent recommendations of two analysts, Tilray is rated a Hold overall. The average price target for TLRY stock is $1.55, representing a potential upside of 26.02% from current levels.
Final Thoughts on TLRY
Tilray’s Q2 Fiscal year 2025 results have been mixed, with a net loss of $85 million somewhat balanced by a 29% rise in gross profit. The market responded cautiously to a plan to reduce alcoholic beverage brands, expected to decrease revenue by an estimated $20 million. Nonetheless, Tilray continues to strengthen its position within the cannabis industry and has its eyes on the U.S. medical cannabis market, pending federal legalization. While the stock is currently on a downward trend and trades at a discount, potential investors might look for signs of a positive price momentum shift before considering a position to avoid catching a falling knife.
