- A lot of cannabis stocks dropped in the last few weeks, meaning it’s been more difficult to invest.
- Despite the volatility, Tilray (TLRY) is firing on all cylinders, making the stock a must-have for cannabis investors.
- The short interest in TLRY stock is also high, making it an ideal target for Reddit investors.
Many cannabis stocks underperformed the broader market in the last few weeks. Investors and cannabis companies are waiting for a big announcement on potential legislation. Though bills passed through Congress in the past, none of them made it all the way. Things remain unchanged, and marijuana is still classified federally as a Schedule I drug. Tilray (NASDAQ:TLRY) is one of many Canadian pot companies seeking to enter the U.S. market, but the regulatory climate is troublesome. Nevertheless, there are other reasons to invest in TLRY stock.
As more states legalize marijuana, its demand is on the rise. But when it comes to the market these days, you should also keep other aspects in mind. Take Tilray’s scale, for example.
The merging of two cannabis companies, Tilray and Aphria, made them the world’s largest cannabis company in terms of annual revenue. The company just passed its latest milestone, an important earnings report, with flying colors, which is a good sign.
|TLRY||Tilray Brands, Inc.||$4.42|
TLRY Is Not Your Average Meme Stock
Tilray is a company founded by two Canadians who are passionate about cannabis. The company provides patients with high-quality medicinal cannabis and recreational marijuana. Tilray has been recognized as one of the world’s leading companies in the cannabis industry, and it continues to grow rapidly.
Meanwhile, Aphria already had a strong business foundation. CEO Irwin Simon and the merger with Tilray have created a profoundly positive impact on the space. It has also created opportunities for novel explorations by the newly formed company.
Cost synergies are reductions in cost that have to do with the merger of two companies. This can include competitive, innovative products and other key strategies such as growth strategies, high-class production facilities, etc. This can help make your business more profitable by providing cost-cutting alternatives, which leads to better growth opportunities while also achieving certain goals.
Tilray already sees cost synergies of up to $76 million from the merger. Management is planning to earn $80 million by May 31 and a further $20 million by 2023.
Tilray is making more money now than ever before. EBITDA and revenue grew — it’s the 12th consecutive time they achieved this. Tilray’s SweetWater Brewing and Manitoba Harvest acquisitions added a lot to their income.
However, Tilray reported a much worse cash flow situation relative to what they were experiencing last year, with a negative $35.6 million in cash flow generation over the third quarter. The company is still pursuing a strategy that should provide positive cash flow amidst continued growth. The company’s $4 billion revenue potential coming from fiscal 2024 is another indication of its strong value in the market. It will also be interesting to observe how other companies fare in comparison.
Short Interest Is on a High
When it comes to investing, people use a unique technique called measuring the “short interest” of a company. This method is helpful because it helps you see how in-demand a certain investment is and can determine if the company is generally in trouble or not.
The higher the short interest, the more you need to stay away. However, that is in usual circumstances. Due to Reddit mania, a high short interest can be a boon. Reddit investors looking to teach hedge funds a lesson will double down on a high short interest stock. At the time of writing, the short interest in TLRY stock stands at 15.25%, which is very high in any circumstance. Hence, a short squeeze could be around the corner, another reason to purchase TLRY stock.
TLRY Is a Good Cannabis Stock
Canada’s medical cannabis demand shows promising results, though it experienced a dip in recreational sales. Tilray is still the No. 1 market shareholder with 10.2% and management believes this creates an opportunity for further growth in Canada.
In addition, Tilray is changing the game in America. They are now at the forefront of innovation, with investments in SweetWater Brewing, Breckenridge Distillery and Manitoba Harvest. This provides stronger business growth for Tilray in America.
Tilray has seen more volatility than some of the other cannabis stocks in recent weeks, but it’s also been trading at a discount, as opposed to Aurora Cannabis. Tilray has a better chance of establishing itself as a dominant player in the U.S. market — and when federal legalization happens, this will be easier to do.
On the publication date, Faizan Farooque 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.