Investors are reacting to this morning’s earnings report from Canadian cannabis producer Tilray (NASDAQ:TLRY). Despite some disappointment in the numbers, TLRY stock was trading as much as 4.7% higher in Wednesday’s premarket.
The report is the company’s first since it combined last month with rival Aphria in a merger that created the world’s biggest pot producer by sales.
The disappointment is that TLRY fell short of analysts’ estimates as pandemic-related lockdowns across Canada tamped down sales. Net revenue rose 25.3% to $142.2 million during the fourth quarter, but fell short of analysts’ average estimate of $146.2 million, according to Refinitiv IBES estimates.
Tilray posted a net income of $33.6 million in the three months through May 31, compared with a net loss of $84.3 million a year earlier. The reported quarter included a one-time adjustment of $19.9 million, resulting from excess inventory quantities from the Aphria merger.
Aphria Synergies Already Showing in TLRY Stock
CEO Irwin Simon said the company has already saved about $35 million in costs from the tie-up with Aphria and was on track to save $80 million over the next 16 months by doing away with office space and redundant executives. Lower logistics costs and better packaging deals will also help matters.
Jefferies Financial Group called the Tilray-Aphria merger a “perfect match” and upgraded TLRY stock to “buy” from “underperform” after the deal closed. Jeffries, and others, say the beefed-up Tilray is in a good position to grow its sales globally, particularly in the U.S. where a growing number of states are legalizing cannabis use, and where there continues to be hope that President Joe Biden and his administration will legalize the drug at the federal level.
This morning’s gains may be a sign that investors overthought the impact of Canada’s lockdowns on TLRY stock. The country’s biggest province, Ontario, was put under lockdown for more than a month from early April as another Covid-19 wave hit.
Heading into today’s earnings report, TLRY stock was down 10.1% over the past five days. That compares with the 1.7% decline in pot-stock exchange-traded fund Cambria Cannabis ETF (BATS:TOKE) which has Tilray shares as its biggest holding, at 12.41% weighting of the 28-stock portfolio.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor.