In 2019, Tilray (NASDAQ:TLRY) stock lost 75% of its value. That same year, Tilray CEO Brendan Kennedy got a 35% raise in his base pay at the company. For reference, this was a year when the S&P 500 gained nearly 29%.
Maybe you have a problem with that, or maybe you don’t. But there are other reasons to sell your shares of TLRY stock or just avoid it altogether.
It might be hard to see this, though, as the share price has more than doubled since the March 18 low point.
Did TLRY stock “deserve” to go up so much? As the CEO’s base pay raise illustrates, what ought to happen and what actually does happen are two different things. In any case, as the facts will show, Tilray’s fiscal position should concern all but the most risk-tolerant of pot stock investors.
A Nasty Quarter and Year
For those who need convincing, let’s break down the numbers from Tilray’s most recently released fiscal data. I’ll let the company speak for itself regarding Tilray’s fourth-quarter financial “highlights”:
“Including non-cash charges, gross margin in the fourth quarter of 2019 was -120%. Net loss for the quarter was $219.1 million, or -$2.14 per share, compared to a loss of $31 million, or -33 cents per share, for the prior year period.”
In other words, Tilray’s fourth quarter of 2019 was considerably worse than the comparable quarter of the previous year, which itself was pretty bad.
Moreover, “adjusted EBITDA was a loss of $35.3 million compared to a loss of $13.3 million in the prior year period.” Different metric, same story.
The picture doesn’t look much brighter if we pull back to view the full year of 2019. As Tilray reported, “Net loss for the year was $321.2 million, or -$3.20 per share, compared to $67.7 million, or -$82 cents per share, for 2018.” And for those keeping score, “Adjusted EBITDA was a loss of $89.8 million compared to a loss of $28.3 million the prior year.”
Is Anyone Buying It?
In spite of all this, the company’s CEO had the audacity to declare that Tilray “will continue being good stewards of shareholder capital.” Check the TLRY stock chart on just about any time frame (the past month and a half being the notable exception) and you’ll find a relentless erosion in “shareholder capital.”
Sure, it’s the part of the CEO’s job description to rally the troops and muster up shareholder confidence. Still, cautious investors don’t have to buy into Kennedy’s “good stewards” sales pitch.
Jefferies analysts Owen Bennett and Ryan Tomkins certainly haven’t bought into it. They’ve set their price target for TLRY stock at $5, implying significant downside from the current share price.
Additionally, the two Jefferies analysts expect Tilray to lose $1.44 per share in 2020, which is substantial relative to the already low stock price. Then, in 2021, they predict that Tilray will lose another 80 cents per share.
But what about the TLRY stock’s recent rally? Shouldn’t that count for something? Beyond a temporary sense of relief, there’s no point in reading too much into the short-term price move.
In all likelihood, it’s just the result of profit taking on the part of short-positioned hedge funds. They’ve profited handsomely, and lightening up on their short positions at the $2.50 level made sense. And keep in mind that this is a small-float stock, so doubling the price isn’t that unusual.
If the short-covering thesis has merit to it, then there’s scant reason to own TLRY stock shares based on their recent price action. As far as the company’s fundamentals are concerned, to quote Matt McCall and the InvestorPlace research staff, “this is not a business I want to sink my hard-earned money in.”
The Takeaway on TLRY Stock
In summary, recent financial data and long-term price trends simply don’t support a long position in TLRY stock. Ultimately, it will take more than words to convince the investing public that the “good stewards” in charge of Tilray have, in truth, earned their keep.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
