The medical and recreational cannabis industry operates in a difficult market full of regulatory policies and strict regulations. Tilray (NASDAQ:TLRY) is a prime example of that as the company has lost over 70% of its value since its initial public offering (IPO). However, Tilray reported earnings this morning, surprising investors with a quarterly profit.
The Canadian cannabis company reported net revenue of $155 million, up 20% year-over-year (YOY). Revenue was higher but failed to meet analysts’ expectations of $170.55 million. The boost in revenue helped Tilray achieve profitability for the quarter, as the company reported net income of $6 million, up $95 million YOY. Indeed, it seems shareholders are valuing profitability higher than sales; shares of TLRY stock are up more than 15% at the time of writing.
Tilray CEO Irwin Simon blamed rising competition and market saturation as the culprits for the revenue miss. Furthermore, Simon explained that Tilray may adjust the prices of some of its products to deal with the competitive landscape.
In 2020, Tilray merged with Aphria, also a Canadian cannabis producer. The merger resulted in the formation of the world’s largest cannabis producer by sales. As expected, the merger likely created cost-saving synergies for the combined entity. Tilray reported alongside its earnings that it had pledged an additional $20 million in cost cuts. That’s in addition to the $80 million originally planned from the merger.
Tilray also reported that it would be changing its name to Tilray Brands. The new name reflects the company’s diversification of its products as it strives to expand globally. However, the name change will not affect the current TLRY stock ticker.
Investors are wondering if this earnings report will guide the way for a new chapter in Tilray’s story. Let’s take a look into how Wall Street analysts feel about Tilray’s potential.
Tilray Price Predictions
- Jefferies has a price target of $22. Analyst Owen Bennett believes that international exposure is picking up as Tilray works to expand its business. Furthermore, Bennett believes that the company’s portfolio of THC and CBD products in the U.S. carries optionality and the potential to grow.
- Cantor Fitzgerald has a price target of $7.40. Analyst Pablo Zuanic made this price target before Tilray reported earnings. Furthermore, the analyst attributes his price target to HiFyre data showing that Tilray sales dropped 16% from the previous quarter. Despite the estimated drop in sales, HiFyre shows that the cannabis market grew 5% from the previous quarter. Cantor estimated that Tilray revenue for the most recent quarter would come in at $164 million, which was above the actual reported revenue of $155 million.
On the date of publication, Eddie Pan did not hold (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.
