Tilray, Inc. (NASDAQ: TLRY), a Canadian cannabis company, reported surprise earnings in the third quarter of Fiscal 2022. Meanwhile, revenues disappointed on unfavorable foreign currency trades and the soft Canadian cannabis market.
Following the mixed update, TLRY stock rose more than 3% to close at $7.25 on Wednesday; but shares are sliding today.
Results in Detail
Total revenues of $152 million grew 23% year-over-year but missed analysts’ expectations of $156.2 million. Remarkably, cannabis revenue surged 32% to $55 million, while beverage alcohol revenue jumped 64% to $20 million. Additionally, wellness revenue stood at $15 million.
Significant growth was recorded in international cannabis, with revenue surging more than 4,000% year-over-year. However, distribution revenue of $63 million was down 11% during the third quarter, impacted by unfavorable foreign exchange rates between the Euro and USD.
Tilray registered third-quarter earnings per share of $0.09, compared to the analysts’ estimated loss of $0.08 per share. The company reported a loss of $1.03 per share in the same quarter last year. Non-operating income of $72.7 million, compared with the loss of $220.3 million in the prior-year quarter, acted as a tailwind.
Gross margin came in at 26%, up from 25% in the prior-year quarter.
Cost synergies of $76 million were achieved on a run-rate basis to date from the Aphria-Tilray merger. Remarkably, the company is likely to record synergies of $80 million by May 31, 2022, which will be five months ahead of schedule. Additionally, synergies of $20 million are expected in Fiscal 2023.
Official Comments
Irwin D. Simon, the CEO of Tilray, stated, “Our third-quarter results reflect progress and momentum across all of our key business segments and geographies, setting the stage to achieve our target for $4 billion in revenue by the end of Fiscal 2024.”
“The proposed HEXO transaction is also expected to facilitate complementary commercial and product innovation and drive production and operating efficiencies. As the global economy re-opens, we are confident that the global cannabis powerhouse at the heart of the Tilray Brands’ value proposition will deliver sustained and tangible shareholder value,” Simon added.
Other Developments
Manitoba Harvest, the world’s leading hemp foods brand and a wholly-owned subsidiary of Tilray, has launched its innovative Hemp+ Matcha and Hemp+ Supergreens powders at Whole Foods Market. These powders will be available at more than 300 stores of the natural and organic foods retailer nationwide in April 2022.
Wall Street’s Take
Following the results, Cantor Fitzgerald analyst Pablo Zuanic maintained a Hold rating but increased the price target to $8.40 from $6.90.
Zuanic commented, “We think the main takeaway from this quarter is the continued strength in the international business (29% of cannabis sales, and likely close to half of gross profits), with the company now in 20 markets…Management is guiding for positive cash generation by next year (the profitable CPG unit should help with this) and reaffirmed the $4 billion sales target by end of FY24.”
Overall, the stock has a Hold consensus rating based on three Buys, seven Holds, and one Sell.
The average Tilray price target of $10.64 implies 56.9% upside potential. Shares have lost ~66% over the past year.
News Sentiment
News Score for Tilray is currently Neutral based on 62 articles over the past seven days. 83% of the articles on TLRY have a Bullish sentiment, compared to a sector average of 59%, while 17% are Bearish, compared to a sector average of 41%.
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