This could be an amazing year for Tilray (NASDAQ:TLRY) stock. Already, the Canadian cannabis company has seen its stock price jump almost 200% on a year-to-date basis.
And the company will be a legitimate contender for cannabis supremacy when its merger with Aphria (NASDAQ:APHA) is completed. The combined two companies will become the largest retail cannabis company when the merger is completed in the second quarter of this year.
For investors, the biggest questions are how the combined company will fare against stalwart competitors like Canopy Growth Corp. (NASDAQ:CGC).
Also, are the expected gains from the Tilray-Aphria merger, plus the anticipated federal legalization of marijuana in the United States, already baked into the TLRY stock price?
Let’s take a closer look.
A Q2 Merger
Tilray made the announcement in December that it was merging with Aphria in a stock-for-stock transaction. Aphria shareholders will receive 0.8381 shares of TLRY stock for each share of Aphria.
Aphria CEO Irwin Simon will be CEO of the new company, and Tilray CEO Brendan Kennedy will be its chairman. According to Kennedy:
“The combined company will have a portfolio of carefully curated and complementary brands in every major cannabis category, including flower, pre-roll, oils, capsules, vapes, edibles and beverages and across all consumer segments, economy, value, core, mainstream and premium.”
The new company will have primary offices in New York and Seattle, as well as in Canada, Portugal and Germany.
Tilray says the merger will strengthen its leadership position in Canada. And just as important, it will allow Tilray to build a “multi-pronged U.S. CPG platform to be immediately leverage for cannabis products when regulations allow.”
Tilray says the merger will also allow it to save more than 100 million CAD in cost savings just through synergies of the combined companies.
TLRY Stock at Glance
Earnings for the fourth quarter and the full year were more than solid. In fact, it was the Tilray’s first profitable quarter on an adjusted basis.
For the quarter, Tilray reported revenue of $56.6 million. On a year-over-year basis, quarterly revenue grew from $46.9 million in fourth quarter of 2019.
Non-adjusted earnings for the quarter came in at a loss of $3 million, or 2 cents per share. On an adjusted basis, the company reported a profit of $2.2 million.
For the full year, Tilray’s revenue came in at $210.5 million, compared to $167 million in 2019. Full-year losses were $271.1 million, or $2.15 per share, which was an improvement from 2019 when the company lost $321.2 million, or $3.20 per share.
The Landscape for 2021
It’s already been a crazy 2021 as the stock more than tripled at one point in early February. Thanks to the traders at Reddit’s r/WallStreetBets, TLRY stock jumped from $19 to $63 in just a matter of days.
Those gains were fleeting, however, as Tilray dropped below $30. There’s every indication that it will hold that level and gather support for more moves higher, however.
President Joe Biden has already promised that his administration will support legalizing medical marijuana. He also supports expunging criminal convictions for cannabis-related offenses.
The House already passed a bill in December to move on those issues, but the Republican-controlled senate defeated the bill at the time. However, now the Democrats control both houses of Congress, since Vice President Kamala Harris provides the tie-breaking vote in the Senate that is split 50-50.
As I wrote in a piece earlier this month, however, investors may still need show some patience. While a majority of Americans already support marijuana legalization, Biden and Congress are focused right now on rolling out coronavirus vaccines and pushing through a $1.9 trillion economic stimulus plan.
The Bottom Line
I am confident that marijuana legalization in the U.S. will happen at some point in the Biden presidency. In the meantime, the Tilray-Aphria merger will position TLRY stock to challenge Constellation Brands for supremacy. And it will put the company in an excellent position to roll into the U.S. when regulations allow.
TLRY stock has a “B” grade and a buy recommendation in my Portfolio Grader right now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.