This Marijuana Giant Is 'Ticking All The Right Boxes' For Long-Term Success, Analyst Says

Tilray Brands, Inc. TLRY released on Monday its financial results for Q2 2023, revealing net revenue of $144.1 million, a 7% decrease compared to $155.2 million in Q2 2022.

Gross profit rose to $40.1 million, a 22% increase, year-over-year. Adjusted gross margin held at 29% compared to the year-ago quarter. The cannabis giant achieved $119.6 million in annualized cash cost-savings since the closing of the Tilray-Aphria transaction in May 2021 - up from $108 million as of August 31, 2022.

For the period, Tilray also reported adjusted EBITDA of $11.7 million, a 15% decrease compared to $13.8 million in Q2 2022. This was its 15th consecutive quarter of positive adjusted EBITDA.

Net loss was $61.6 million, compared to net income of $5.8 million in Q2 2022.

The Analyst

Following the report, Cantor Fitzgerald’s Pablo Zuanic maintained a ‘Neutral’ rating on Tilray's stock, reducing the price target from $4.50 to $3.65.

The Thesis 

The analyst lowered the price target to address reduced estimates and sectoral derating. 

In the long term view, Tilray is ticking “all the right boxes” said Zuanic, referring to how the company is number one in the domestic recreational market, as well as in Europe, while also being focused on developing a CPG brand portfolio that could one day overlap with marijuana. 

Tilray reaffirmed EBITDA guidance of $70-80 million for the fiscal year ending May 2023, but Zuanic projects $62 million. 

Tilray's Priorities

The analyst noted that the company’s leadership is aware of difficult times for the industry, and is thus focused on cost savings (across divisions and regions, and is finding original ways of using capacity), improving cash flow, and maintaining a strong balance sheet.

“Remaining on Nasdaq remains priority for the company, so management hinted it will not consider Canopy Growth’s CGC strategy of potentially delisting and only having a TSX listing.”

Zuanic wants 50% upside for the stock to get an ‘Overweight’ rating; that’s why he is staying ‘Neutral’ on Tilray's stock.

Among other Canadian cannabis companies, Zuanic only rates Aurora Cannabis ACB and Village Farms VFF as ‘Overweight.’

The Price Action 

Tilray shares were trading flat at $3.04 per share at the time of writing Thursday morning. 

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