Cannabis and related products seller Tilray Brands (NASDAQ:TLRY) is headquartered in Canada. However, the company seeks to expand its presence in the U.S. if/when cannabis is legally rescheduled there. In anticipation of this, investors should buy Tilray stock before the U.S. “canna-boom” starts.
Recently, the U.S. Department of Justice under the Biden administration proposed to legally reschedule/reclassify cannabis. That’s a major potential catalyst, but as we’ll discuss in a moment, Tilray is already showing remarkable financial progress. So, there’s no need to wait for marijuana-law reform to start a small Tilray share position.
Tilray’s Excellent Financial Improvement
There are a couple of reasons not to over-invest in Tilray stock. First, it’s unclear if cannabis will be legally reclassified in the U.S. Second, Tilray is still an unprofitable business.
Yet, while Tilray isn’t perfect, the company is improving. In the third quarter of fiscal 2024, Tilray narrowed its net earnings loss to $105 million (12 cents per share), versus $1.2 billion ($1.90 per share) in the year-earlier quarter.
This bottom-line improvement was made possible, in part, by Tilray’s impressive revenue growth. Specifically, Tilray grew its net revenue by roughly 30% year over year to $188.3 million.
An evident highlight of Q3 FY2024 was Tilray’s sales growth in the company’s beverage-alcohol segment. Tilray managed to increase its beverage-alcohol revenue by 165% YOY to $54.7 million; this growth was driven, in part, by Tilray’s “new Craft Acquisition brands.”
Don’t Fret Over Tilray’s Possible Share-Sale Announcement
As I alluded to earlier, Tilray seeks to position itself to capitalize on potential U.S. cannabis-law changes. However, Tilray’s U.S. build-out won’t happen without near-term capital outlays. As the old saying goes, it costs money to make money.
Investors shouldn’t worry too much about Tilray’s announcement that the company might sell up to $250 million worth of its shares via an at-the-market equity program. For one thing, it’s not guaranteed that Tilray will actually sell $250 million worth of the company’s shares.
Also, Tilray doesn’t plan to use the share-sale net proceeds “for general working capital purposes.” Rather, Tilray would use the proceeds to “fund strategic and accretive acquisitions or investments in businesses.”
These could include “potential acquisitions of assets in the U.S. and internationally in order to capitalize on expected regulatory advancements or expansion opportunities.”
So, Tilray may end up selling its shares in the coming months in order to generate more long-term revenue in the U.S. and abroad. Therefore, I encourage nervous investors to think about the big picture instead of worrying right now about Tilray’s ATM equity program.
Ready for the U.S. ‘Canna-Boom’? Buy Tilray Stock.
There’s no guarantee that U.S. cannabis-law changes are coming soon. However, with or without those changes, Tilray is already showing excellent improvement in the company’s financials.
It won’t be a huge problem if Tilray ends up selling its shares. This could help the company capitalize on opportunities in the U.S. and elsewhere. Hence, investors ought to consider taking a small but confident position in Tilray stock today.
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.
