In Light of Surprise Profit, Tilray Is a Cannabis Go-To Holding

Don’t look now, but Tilray (NASDAQ:TLRY) stock is making the headlines once again. It seems like yesterday when Tilray investors cheered the company’s takeover of Canadian cannabis rival Aphria.

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

And yet, that happened several months ago and the Tilray share price has actually declined since that time. I suppose it’s a case of “buy the rumor, sell the news,” or maybe just an instance of post-hype disappointment.

Either way, TLRY stock was going nowhere fast in the weeks leading up to the company’s fourth-fiscal-quarter fiscal data release. Still, the investing community was watching closely with anticipation, hoping for something exciting to happen.

And, the result wasn’t disappointing to anyone, except for the short sellers, who are likely regretting their ill-timed positions now.

A Closer Look at TLRY Stock

The last time I recommended a long position in TLRY stock, it was March 3 and the share price was around $25.

Okay, so I completely botched that bullish call. Perhaps I was hoping for a repeat of the February moonshot, in which Tilray shares popped to a 52-week high of $67.

Admittedly, I was also riding high on the Aphria merger. After all, the combined company was the largest global cannabis company in terms of revenues.

Here’s the problem. The Tilray-Aphria merger was already a known factor, so this event was undoubtedly priced into TLRY stock.

It’s also possible that the early February pop-and-drop was precipitated by Reddit users. At that time, they were allegedly short-squeezing a variety of stocks.

In any case, TLRY stock declined soon after I recommended it. By July 27, it had fallen all the way down to $12 and change, and optimism was at a low point.

Shocked, and Relieved

But then, it’s after the storm that rainbows can appear.

In other words, peak pessimism can lead to positive surprises during earnings releases.

Much to the short sellers’ shock and horror, a relief rally took place on July 28 after Tilray released its fourth-fiscal-quarter results.

The stock price soared nearly 30% during the trading day, testing the $16.50 level with high volume.

Now, let’s be realistic. I’m not saying that TLRY stock will recapture the prior peak of $67 this week or this month.

However, getting back above $50 and even $60 could actually happen this year. I’ve seen crazier things happen in the cannabis sector.

Besides, Tilray’s first quarterly earnings report since the company combined with Aphria, could be considered a make-or-break moment.

And as we’ll see, Tilray passed this crucial test with flying colors.

Aggressive Revenue Target

What made the fiscal report so outstanding was not only the quarterly results, but also Tilray’s ambitious outlook for the future.

Reportedly, Tilray posted $33.5 million in net income for the quarter that ended on May 31. That figure translates to 18 cents per share.

It’s a vast improvement over the loss of $84.3 million, or 39 cents per share, recorded during the year-earlier period.

Furthermore, Tilray’s revenues increased to $142.2 million from the year-ago quarter’s $113.5 million.

Granted, the FactSet analyst consensus called for $199 million in revenues, so Tilray missed there.

Still, the company posted a huge per-share earnings beat as the analysts were bracing for a loss of 12 cents per share.

And perhaps best of all, Tilray Chief Executive Irwin Simon established a goal of achieving $4 billion in revenues by the year 2024. That target may be aggressive, but it should provide encouragement to the shareholders.

The Bottom Line

Thus, while Tilray’s recently released financial results didn’t exceed all expectations, they certainly provided hope fuel for the bulls.

Only time will tell whether the company can continue to ride this wave of enthusiasm.

For now, however, it sure feels like Tilray is on a path to bigger and better things.

On the date of publication, David Moadel 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.


Article printed from InvestorPlace Media, https://investorplace.com/2021/08/in-light-of-surprise-profit-tlry-stock-is-a-cannabis-go-to-holding/.

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