Tilray (NASDAQ:TLRY) is having quite a big day as stocks are lower as of this writing. There’s some big news happening, and it looks like a bottom may be in depending on macroeconomic conditions. Is now the time to consider a small position in TLRY stock?
Tilray is a global cannabis lifestyle and consumer packaged goods company. Operating in several countries throughout Canada, the United States, Europe, Australia and Latin America, Tilray Brands is on a “mission to change people’s lives for the better.” With a diversified portfolio of brands, it holds a significant position in the cannabis research, cultivation and distribution market.
Tilray Heats Up on Beer Brand Deal
Tilray Brands recently announced a definitive agreement for the acquisition of eight beer and beverage brands from Anheuser-Busch (NYSE:BUD). This acquisition is expected to position Tilray as the fifth-largest craft beer brewer in the U.S. with a 5% market share in the craft beer industry. The transaction is expected to close in 2023.
As part of the agreement, Tilray will acquire the following brands: Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy.
Importantly, the company expects that the acquisition will triple Tilray’s beer sales volume, projecting an increase from 4 million cases per year to 12 million.
This is a major catalyst. Fundamentals are also improving. Tilray Brands recently released its fiscal Q4 2023 report, which showcased record-breaking revenues. The company reported revenues of $184.19 million, a 20% increase from the same quarter last year. The company also reported a breakeven EPS due to much higher gross margins than previous years. The cannabis gross margin was 61% and the beverage alcohol business margin was 55%.
The company’s Q4 2023 revenue breaks up among the following segments: Cannabis Business ($64.4 million), Distribution Business ($72.6 million), Beverage Alcohol Business ($32.4 million), and Wellness Business ($14.8 million). In addition, Tilray’s strong financial performance is reflected in its balance sheet. The company reported cash and equivalents of $448.5 million as of the end of Q4.
The Bottom Line on TLRY Stock
Sentiment may be turning here. Just keep in mind that despite positive developments and financial performance, investing in Tilray Brands comes with its own set of risks.
The cannabis industry, in general, faces stiff competition and stringent regulations. Moreover, the recent rally in Tilray’s stock price could be temporary and might subside once the market fully digests the company’s recent developments.
Bottom line? With a robust portfolio, strong financial health, and strategic growth plans, Tilray Brands holds potential as an investment opportunity. Just be mindful that a credit event, which I suspect we are close to, won’t spare TLRY stock from joining broader markets lower.
On the date of publication, Michael Gayed 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.
