Cannabis investors woke up to a negative sell-side take on Tilray Inc. TLRY Friday, with Jefferies calling the Canadian company's valuation unjustified.
Too much value is assigned to Tilray's partnerships with Anheuser Busch Inbev NV BUD and Authentic Brands Group, Bennett said in the initiation note.
"We appreciate [Tilray] is well-placed in medical, but future value here will be driven by intellectual property, for which little visibility [exists] near-term," the analyst said.
The company's share structure also raise concerns of a risk of increased volatility, Bennett said.
Tilray’s valuation is too costly, the analyst said. "Our 10-year DCF-driven valuation suggests the stock is too expensive for its outlook, with an appropriate discount for long-term medical uncertainty not captured."
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Research suggests that Tilray lacks in the recreational market, as its focus has been on medical market, Bennett said.
Along with Canopy Growth Corp. CGC, Tilray is seen as a medical leader globally. Yet its lack of IP and drug formulations give Jefferies cause for concern about the company's long-term value, the analyst said.
Jefferies sees Tilray falling short of competitors Canopy and Aurora Cannabis Inc. ACB.
The research firm forecast 2020 calendar year sales for Canopy and Aurora that are 2.7x and 2.2x higher than Tilray's.
Tilray shares were down 1.92 percent at $68.38 at the time of publication Friday.
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