Sept. 19 was the one-year anniversary of Tilray’s (NASDAQ:TLRY) big blast-off that sent Tilray stock to an intraday high of $300, temporarily adding $17 billion in market cap to the company’s valuation.
Of course, we know that the good times didn’t last. TLRY stock ultimately closed trading at $214.06, up 38% on the day.
Worse still, Tilray stock has fallen 88% over the past year since closing above $200.
Tilray Stock at $35
Anyone who’s made a price prediction about Tilray in the last year has been clobbered. I should know. I’m one of those sad souls. In July, I wrote Around $35, Tilray Stock is a Buy, an article about where I thought the falling knife would reverse course.
I was wrong.
“Trading around $42 as I write this, I still wouldn’t buy it, I wrote July 24. “However, if Tilray stock were to fall into the mid-$30s, I’d probably change my tune.”
Well, it got as high as $46, before announcing Q2 2019 earnings Aug. 13 after the markets closed. The next day it lost 15% of its value closing at $39.04. As I write this, it’s down another 33% from its Aug. 14 closing price.
Overall, since reporting a bigger loss in the second quarter, Tilray has lost almost 50% of its value. That’s on top of the 79% loss between Sept.19, 2018, and Aug. 14, 2019. From here, $35 is looking like a target price rather than a price at which to buy.
The Bleeding Didn’t Stop
I thought the bleeding would stop around $35. I was wrong.
Tilray came out with an adjusted 32-cent loss in the second quarter, six cents worse than analyst expectations. However, it did grow revenues by 371% year over year in the second quarter to $45.9 million, 14% better than the analyst estimate of $40.3 million.
As Tilray CEO Brendan Kennedy stated in its Q2 2019 press release, the company nearly doubled its adult-use revenue in the quarter. That said, analysts believe that Tilray doesn’t stand a chance in the Canadian market, up against four larger licensed producers including Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB).
To some, Tilray’s mish-mash of assets suggests that it’s a jack of all trades, master of none. As each day passes, it becomes evident that the U.S. market is the biggest prize in the global cannabis game and Canada is just a consolation, reminding investors that Tilray’s future prospects are uncertain at best.
Add in the vaping issue, which has seen vaping products take a big hit, despite the fact only one death is said to have occurred from THC vapes bought in legal shops, and a black cloud has settled over the entire industry.
This, understandably, is acting like a big headwind for all cannabis stocks, including Tilray. Until this issue is resolved, I don’t know if there’s anything to keep TLRY stock from slipping into the low $20s.
I hope I’m wrong.
Is Tilray Stock a Buy at Any Price?
I believe it is.
Between its Portugal operations, its hemp business Manitoba Harvest, and its partnership with Anheuser-Busch (NYSE:BUD), Tilray’s got its hands in enough interesting pies that it’s worth taking a chance on but not at any price.
It recently announced that it was buying Alberta cannabis retailer Four20 for as much as C$110 million. Four 20 has six stores open in Alberta with another 16 on the way. Of all the provinces, Alberta has delivered the best retail market for cannabis consumers, which means Four20’s experience in this market will be invaluable as other provinces allow licensed producers to open retail stores.
Tilray might be a falling knife but its assets aren’t nearly as much of a dog’s breakfast as some in the media, including analysts, would portray them.
It’s going to take as long as five years to find out who the real cannabis winners will be.
Until then, if you’re going to invest in cannabis stocks, you’ve got to put your big boy or girl pants on and accept that volatility is not going away anytime soon.
InvestorPlace contributor Mark Putrino recently suggested that Tilray stock could have strong support at $22 because this is where TLRY went public in 2018.
However, it’s always tough to bet on a falling knife.
I’d wait for a catalyst to appear before buying its stock at this point. You’re better safe than sorry.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.