Key Points
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Tilray’s management may have touted “record” numbers for the company’s recently completed fiscal year, but a closer look suggests mixed results at best.
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Dilution concerns and a limited exposure to potential U.S. regulatory changes may also explain why investors aren’t lining up to bid up the stock.
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Unless Tilray makes a big pivot back into its legacy business, or other bona fide “needle-moving” events transpire, expect lackluster price action to continue.
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Late last month, Tilray Brands (NASDAQ: TLRY) released its latest fiscal results and guidance updates. The market reacted positively to both, resulting in a modest post-earnings rally.
Since then, however, the bull run for one of the most-followed marijuana stocks has run its course. This is especially interesting, given that the U.S. legalization catalyst seems to be strengthening at the same time. Still, considering several factors, it is not surprising that investors appear hesitant to bid up Tilray shares.
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Tilray’s earnings were not much of a game changer
Take a look at Tilray’s latest quarterly financials, released on July 28, and you’d think that the Canada-based cannabis company had turned a corner. In the earnings release, management touted the company’s “record revenue and adjusted EBITDA” and provided promising guidance for the coming fiscal year.
Yes, last fiscal year, revenue increased by 11%, to around $915 million, signaling that Tilray’s getting close to hitting its $1 billion annual revenue target. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 11%, to $61.1 million. Adjusted net income, rising from $6.5 million to $12.2 million, nearly doubled as well. Even so, adjusted earnings fell short of sell-side forecasts. Worse yet, on a GAAP basis, Tilray once again reported heavy losses, with net losses attributable to Tilray shareholders totaling $49.6 million, or negative 43 cents per share.
Other factors keep investors hesitant about the stock
For fiscal year 2027, Tilray’s management expects adjusted EBITDA of $68 million to $75 million, yet it’s unclear whether this will translate into a swing to positive GAAP earnings. Management may also be touting how it’s cut Tilray’s debt to effectively zero, but it’s doing so in a dilutive manner: through debt-for-equity swaps.
Even as the U.S. federal government’s marijuana rescheduling efforts continue, Tilray has relatively limited exposure to this catalyst. Now diversified into areas such as alcoholic beverages and pharmaceutical distribution, cannabis accounts for just 29% of overall sales. Barring an end to share dilution, a significant improvement in results next quarter, or a big pivot back toward recreational cannabis, ho-hum price action will likely persist.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.
