If you’re an avid marijuana-market trader, you may already know that Canadian company Tilray (NASDAQ:TLRY) merged with Aphria in May 2021, thereby creating the world’s biggest cannabis company by revenue. That sounds like a fabulous investment opportunity, but TLRY stock has consistently underperformed since February of last year.
Probably due to the negative price pressure on the stock, analysts on Wall Street have grown increasingly bearish about Tilray. Reportedly, analysts have reduced their outlook on Tilray 20 times since October.
Maybe they’re right to lean bearish since Tilray’s financial situation isn’t ideal. As InvestorPlace contributor Mark R. Hake pointed out, Tilray had “cash bleeding out the door” not long ago (referring to the company’s negative free cash flow).
However, when the prevailing sentiment is largely negative, that’s when my contrarian instincts come to the fore. While Tilray’s fiscal profile may be imperfect, the company’s ventures into sub-sectors beyond cannabis cultivation could drive greater revenues and, possibly, higher share prices in 2022.
A Closer Look at TLRY Stock
It may have been the Tilray-Aphria merger which was announced in late 2020, or it may have been a Reddit-fueled short-squeeze. Probably, it was a combination of those two events which propelled TLRY stock to a 52-week high of $67 on Feb. 10, 2021.
That’s quite a rally considering the stock started off the year at $9. Who could have imagined, then, that the Tilray share price would finish 2021 in the red?
Yet, that’s exactly what happened after TLRY stock relentlessly declined week after week, month after month. By early 2022, after Tilray posted not-as-bad-as-expected fiscal-second-quarter results, the share price was hovering around $7.
So, are we looking at a toxic asset here, or a screaming buy? Perhaps a peek into Tilray’s latest developments can add some clarity and motivate value hunters to give this Canadian canna-business giant another chance.
Meeting Patients Where They Are
As recreational cannabis use gains greater acceptance, sometimes we might forget that there’s a burgeoning medical cannabis market, as well. Aphria, which is now Tilray’s medical subsidiary, is taking a bold step in making cannabis more easily available to some patients who might need it.
Tilray Canada President Blair MacNeil explains his company’s commitment to this mission:
“[O]ur goal is to be the trusted partner for patients by providing them with high-quality, precise, and efficacious medical cannabis treatment. Delivering on this mission means meeting patients ‘where they are,’ including those who are unable or reluctant to swallow medication or do not prefer the taste of cannabis oil.”
To achieve this, Aphria is introducing “medical cannabis oral strips in THC and CBD-rich varieties.” There’s no need to inject or inhale anything, as each Aphria medical strip contains a thin, edible film with cannabinoids that absorb directly into the bloodstream. The strips are already available in Canada. They should provide Aphria/Tilray with a significant revenue source, while also offering patients an easier method of cannabis consumption.
Distilling the Profit Potential
Another revenue source for cannabis companies — which investors sometimes forget about — is cannabis-infused beverages.
Tilray is clearly not afraid to go toe-to-toe with larger alcohol companies. Just recently, the company announced its acquisition of Colorado-based distilled spirits platform Breckenridge Distillery.
Irwin D. Simon, Tilray’s chairman and chief executive officer, describes Breckenridge Distillery as an “iconic addition” to Tilray’s platform. I tend to concur, as it opens up the possibility of launching THC-based beverages at some point.
Moreover, Breckenridge Distillery was an ideal acquisition target for Tilray. In Colorado and elsewhere, Breckenridge Distillery is known for its bourbon whiskey collection and craft-spirits portfolio.
With this acquisition, Simon identified a $4 billion revenue goal for the end of fiscal year 2024. Pardon the pun, but it’s certainly encouraging to see Tilray’s CEO in good “spirits.”
The Bottom Line on TLRY Stock
No guts, no glory, as they say. Are you prepared to buy TLRY stock when so many investors and Wall Street experts dislike it?
The important thing to keep in mind is that Tilray is unafraid to venture into different cannabis niche segments. This should stand the company in good stead as market conditions change over time.
So, don’t hesitate to jump at the chance to own TLRY stock at a drastically reduced price. Through Tilray’s evolution and value-added additions, the company could spearhead a spectacular cannabis-market comeback this year.
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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
