Why and How to Buy a Tilray Earnings Beat

It may not be the best-in-breed stock often debated about among investors. But today and following earnings, Tilray (NASDAQ:TLRY) is looking a bit more like the “best-in-weed.” Let’s take a look at what’s unfolding off and on the price chart of TLRY stock, then offer an aligned, risk-adjusted way to go long and not stink up the trading account.

Tilray (TLRY) logo on a web browser.
Source: Jarretera / Shutterstock.com

Back in 2018, TLRY was considered the top dog by many cannabis investors entering the emerging market. And for good reason. Canadian-based Tilray was not only a top producer of medicinal marijuana, but the stock was smoking higher. Shares soared by more than 1,100% in a matter of weeks. And it’s large-cap valuation put it in a league of its own. Poof!

Then came the big stink inexorably tied at the hip with bubbles and overzealous thematic investment schemes. From its split-adjusted high of $300 set in September 2018, shares collapsed a near fatal 99% at their Covid-assisted low of $2.43 in March 2020.

But today and on the heels of fairly strong earnings report, it’s time to let bygones be bygones in Tilray. Well, kinda.

So, what exactly are today’s quarterly numbers saying? Receiving top billing, investors received a surprise whiff of unexpected profits from TLRY. On an EBITA basis the outfit delivered $2.2 million for its fourth quarter. Actual earnings per share were still in the red, but the company’s two-cent loss easily upended street forecasts calling for a per-share loss of 14 cents. Nice, right?

Sales Get Attention

Tilray’s sales also favorably turned a few heads. Analysts at Zacks forecasted revenue of $55.55 million compared to an actual top-line of $56.6 million for Q4. Revenue also grew just over 20% from a year ago and sequentially increased by 10% from the third quarter.

Digging a bit deeper into the report, TLRY’s cannabis revenue grew by 46%. The top-line was bolstered by medicinal sales and Canada’s recreational market. The latter saw an increase of 49%, while the former surged by 191% on international interest in Tilray’s products. Average selling prices also rose year-over-year on the back of greater consumer demand for potent recreational products such as vapes and edibles.

Throw in the possibility of a merged industry powerhouse with Aphria (NASDAQ:APHA) and today’s more lenient U.S. administration pushing for greater cannabis legalization, investors have a couple other reasons to be upbeat about. As well, with a well-fertilized hole dug into the price chart to support future growth in TLRY stock, there’s another reason to consider portfolio exposure to Tilray shares.

TLRY Stock Daily Price Chart

Tilray (TLRY) deep pullback opportunity developing


Source: Charts by TradingView

If investors are interested in cannabis’ best-in-breed, I’ve advocated for Canopy Growth (NYSE:CGC) consistently over the past year. Most recently, I wrote about CGC in early January. K-A-A-C-H-I-I-N-G!! I still like Canopy. But similar to the beverage market and one whose top players have taken stakes in this emerging industry, there will be multiple winners over the longer-term. Think Coca-Cola (NYSE:KO) versus Pepsi (NYSE:PEP). And now and more than in a long while, TLRY is jockeying itself as one of those survivors.

Sporting an all-time-high of $300, there’s a chance in the distant future TLRY will break out to new highs not unlike Amazon (NASDAQ:AMZN) or Microsoft (NASDAQ:MSFT) managed to do years after a painful dot-com crash. But let’s not put the cart in front of the horse. Today and after a steep and fast, but not entirely uncommon correction for a stock of Tilray’s caliber, shares are approachable as a shorter-term buy, regardless of what the long term may or may not look like.

Technically, TLRY stock has tested its 62% retracement level tied to its Covid-driven March bottom. Reinforcing the deep challenge, shares are finding some chart support from an emerging trendline, as well as an oversold stochastics indicator attempting a bullish crossover signal. Lastly and as a contrarian style purchase decision, coupled with short interest of around 22.50%, the potential for another short squeeze backed by TLRY’s improved earnings picture is now a consideration as well.

A Strategy

For investors interested in gaining a bit of exposure to Tilray, the June $35/$50 bull call spread is one favored strategy. Priced for about $3.00 per spread, this vertical offers sufficient time for TLRY’s emerging uptrend to develop favorably. It also keeps risk in this volatile stock contained to less than 10%.

And if that weren’t enough, given the spread’s placement, it also enjoys the ability to strongly outperform a long stock position during a meaningful rally.

On the date of publication, Chris Tyler does not hold, directly or indirectly, any securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100%  the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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