Tilray stock is still a pass, says Haywood

Haywood Capital Markets issued a report on Tilray Brands (Real Time Tilray Stock Price, Chart, News, Analysts, Financials TSX:TLRY) on Tuesday, with analyst Neal Gilmer saying the company’s just-announced agreement to acquire fellow Canadian cannabis LP HEXO Corp will help in Tilray’s efforts to gain market share and reach positive free cash flow. At the same time, Gilmer is staying on the sidelines on the stock, reiterating with the report a “Hold” rating and 12-month target of C$3.50 per share.

TLRY stock was notably down on Tuesday after the company announced after market close on Monday both its fiscal third quarter 2023 earnings for the period ended February 28, 2023, and its definitive agreement to acquire HEXO. The purchase price was set at $56 million, which Tilray said it will pay through issuing 0.4352 TLRY shares for each outstanding HEXO share. Tilray merged two years ago with another Canadian licensed producer, Aphria.

“Looking ahead, we are focused on being the leading, most diversified cannabis lifestyle and CPG company in the world. Our strategy to deliver on this vision is centred on pursuing targeted growth opportunities, as reflected in our opportunistic acquisitions of both Montauk Brewing Company and HEXO, which has made significant strides in driving operating efficiency and improving profitability while continuing to invest in industry-leading brands,” said Tilray CEO and Chairman Irwin D. Simon in a press release.

On the quarterly results, Tilray saw its Q3 net revenue decline by four per cent year-over-year to $145.6 million and adjusted EBITDA climb to $14.0 million compared to $10.1 million a year earlier. (All figures in US dollars except where noted otherwise.)

Commenting on the quarter, Gilmer said the Q3 topline was under his estimate of $149.4 million and the consensus forecast at $150.1 million, noting that revenue was negatively impacted by the strength of the US dollar. Adjusted EBITDA was also under his estimate at $15.8 million and the Street at $16.9 million. Gilmer said Tilray also recorded a non-cash impairment charge of $1,115.4 million as a result of higher interest rates and a decrease in share price. 

“While the quarterly results were below our expectations, we believe the [HEXO] transaction should create a platform for Tilray to begin recapturing market share and achieve its goal of delivering positive free cash flow from its operating segments in fiscal 2023,” Gilmer wrote.

Gilmer said the pro-forma company would have a Canadian adult-use market share of about 12.8 per cent as of the calendar first quarter of this year, which would put it at nearly double the next-ranked LP at about seven per cent.

At press time, Gilmer’s maintained C$3.50 target on Tilray stock represented a projected return of 28 per cent.

“Tilray remains a market share leader in the Canadian landscape. We are encouraged by the international opportunities, as well as expanding beverage segment in the U.S. However, we remain cautious on the overall Canadian landscape and the lack of growth the Company has been able to achieve. We maintain our Hold rating as we await more evidence on accelerated near-term revenue growth drivers,” Gilmer said.

On March 21, Tilray announced that its Montauk Brewing ( one of multiple Tilray brands ) craft beers were now available at more than 3500 locations, including at 7-Eleven, Costco, BJ’s,  Target, Whole Foods, Trader Joe’s, Total Wine, Speedway, Stop & Shop, King Kullen, Walmart and Wegman’s.

Ty Gilmore, President, U.S. Beer at Tilray Brands, commented on the development.

“Growing Montauk Brewing’s distribution across the northeast in New York and New Jersey and expanding into new states including Connecticut, and Rhode Island was a strategic first step in our expansion plan. Montauk Brewing has enormous potential to grow into a true national brand and we will continue to leverage our existing nationwide infrastructure to expand the brand’s distribution and growth through innovation for all channels and consumers, building a diversified portfolio while giving our fans what they want,” he said.

About TLRY

Tilray is a Canadian pharmaceutical and global cannabis company that produces and distributes medical and recreational cannabis products. The company was founded in 2013 in British Columbia and was one of the first companies to receive a license from Health Canada to produce and sell medical cannabis.

Tilray has since expanded its operations globally, with subsidiaries and joint ventures in countries such as Germany, Portugal, and Australia. The company’s products include dried cannabis, oils, capsules, and other derivatives, which are sold under various brand names.

In 2018, Tilray became the first cannabis company to go public on the NASDAQ stock exchange in the United States, raising $153 million in its initial public offering. The company’s stock price surged in the following months, reaching a high of over $300 per share in September 2018, before declining significantly.

Tilray has faced various challenges and setbacks, including intense competition in the cannabis industry, regulatory hurdles, and supply chain issues. In 2021, the company merged with Aphria, another Canadian cannabis company, to form the largest cannabis company in the world by revenue. The merged entity is now known as Tilray Inc. and trades on the NASDAQ under the ticker symbol TLRY.

About Montauk Brewing Company

Founded in 2012 by longtime friends and based on the coast of Montauk, New York, Montauk Brewing Company embraces the motto “Come As You Are,” honoring adventure and passion for the simple pleasures in life. Today, Montauk Brewing Company is one of New York’s most beloved and fastest selling craft-brands and is a subsidiary of Tilray Brands, Inc. (Nasdaq: TLRY; TSX: TLRY).

Montauk Brewing Company was proudly named the #1 Craft Brewer in Metro New York by Nielson[2].  Montauk Brewing’s beloved brews are now available across 3,500 retail locations and several of NYC’s major venues including Citi Field, Madison Square Garden, Moynihan Train Hall, and UBS Arena.

Montauk Brewing Company distributors in the U.S. include Shore Point Distributing Company, Inc., Kramer Beverage Company, Oak Beverages Inc., Lake Beverage Corporation, Saratoga Eagle, Eagle Beverage Company, Try-It Distributing, A.L. George, Mc Craith Beverages, Dutchess Beer Distributors, Northeast Beverage, F&F Distributors, Inc., and C&C Distributors RI.

For further information about Montauk Brewing Company, please visit www.montaukbrewingco.com and follow @montaukbrewco. Montauk Brewing invites you to visit their red Brew Barn in downtown Montauk, open year-round for fresh beer needs, located just steps from the surf – right where it belongs.