Judging from his recent commentary, it’s fair to say that Tilray (NASDAQ:TLRY) CEO Brendan Kennedy is a pretty good hype man. He talks a good game, and Tilray stock holders might appreciate Kennedy’s willingness to turn lemons into lemonade, so to speak.
However, big talk doesn’t equate to positive data. And informed investors should generally emphasize actual results over a chief executive’s jawboning. After all, it’s Kennedy’s job to put a positive spin on Tilray’s fiscal results.
The last thing I want to see is hopeful Tilray stock investors get punished by an unforgiving market. They’ve already suffered enough in 2020. They also lost money in 2019.
Thus, despite the CEO’s encouraging words, maybe it’s time to admit that a turnaround for Tilray just isn’t in the cards.
A Closer Look at Tilray Stock
The first number that pops out to me is Tilray’s trailing 12-month earnings per share of -$4.73. That’s a hard number to swallow, especially considering Tilray stock closed at $5.31 on Sept. 11.
When the historical EPS is a negative number whose absolute value is similar to the stock’s current share price, that’s not a good sign. It’s also discouraging to see how poorly Tilray stock has performed, even if we don’t count the price action after the onset of Covid-19.
Today, it’s amazing to consider how the bulls were threatening to take Tilray stock above $150 in October of 2018. Even prior to Covid-19, it was a struggle to keep the share price above $10.
And nowadays, the possibility of Tilray stock becoming a penny stock is very real. There might be compelling reasons to recommend a long position in this stock at some point in the future. For now, though, it’s evident that the bears are fully in control of the price action.
You Call That Progress?
Proudly wearing his hype-man hat, Tilray’s CEO had some mighty encouraging things to say about his company as the second-quarter fiscal results were released.
For one thing, Kennedy used the phrase “significant progress” in association with Tilray’s quarterly results. Plus, he characterized Tilray’s second-quarter year-over-year revenue growth as “healthy.”
I suppose one could call Tilray’s Q2 year-over-year revenue growth rate of 10% “healthy.” However, that healthy-looking facade conceals a darker parts of the bigger picture:
- Q2 revenues declined by 3.2% from the first quarter
- Adult Use sales slumped 15.8%
- Canada Medical sales slipped 5.3%
- Hemp sales fell 5.1%
But wait, there’s more. For the second quarter, Tilray posted a heartbreaking loss of $81.7 million, which equates to 66 cents per share.
That’s substantially worse than the already disappointing loss of 36 cents per share in the year-ago quarter. It’s also a big miss compared to the loss of 32 cents per share that Wall Street was expecting for Q2.
No Room for Excuses
Yet somehow, Tilray’s CEO expects investors to believe that “we have positioned Tilray to enter the second half of 2020 in a stronger position.” Given the aforementioned data points, Kennedy’s words are easy to say but much harder to believe.
If there’s one thing more exasperating than unjustified confidence, it’s excuses. Informed investors should leave no room for excuses when evaluating a company.
In this instance, Tilray’s management blamed the company’s deep sequential decline in revenues, in part, on “pantry-loading.” Other partial sources of blame included “purchasing behavior by the provinces” and “the shift to curbside pickup or delivery.”
Note that these are all external targets of blame. As an investor who appreciates honesty, I’d like to see Tilray’s management take more responsibility for the company’s inability to execute.
Until that happens, it will be difficult to maintain any real sense of faith in the company going forward.
The Bottom Line
In the case of Tilray, there’s a divergence between words and hard data that’s unsettling. Tilray’s management should take more responsibility for the company’s fiscal performance (or lack thereof).
Until that happens, it will be impossible to recommend a long position in Tilray stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.