TLRY stock still a pass in 2024, Haywood says

Following the company’s second quarter results, Haywood analyst Neal Gilmer remains on the fence when it comes to  Tilray (Tilray Stock Quote, Chart, News, Analysts, Financials NASDAQ:TLRY).

On January 9, TLRY reported its Q2, 2024 results. The company posted Adjusted EBITDA of $10.1-million on net revenue of $194-million, a topline that was up 34 per cent over the same period last year.

“Tilray Brands is a major force at the forefront of innovation, disrupting the global CPG [consumer packaged goods] industry across medical and adult-use cannabis, wellness foods and snacks, and craft beverages,” CEO Irwin Simon said. “Our Q2 financial results demonstrate the strength of our brands, our global team and our diversified growth strategy. We grew revenue, enhanced our capital structure and realized operating synergies, while strengthening Tilray Brands’ position as the No. 1 cannabis operation and brand portfolio in Canada by sales volume and market share, the European market leader in medical cannabis, and the leader in branded hemp products. We have also emerged as a disruptor in the craft beverage/alcohol industry by assembling a portfolio of highly sought-after brands that are dominating key regions across the U.S. in the northeast, the Pacific Northwest and the southeast. Tilray is now uniquely positioned to become a top-12 beer and alcohol beverage company in the U.S.”

Gilmer summarized the quarter.

“Tilray reported net revenue of $193.8M and adjusted EBITDA of $10.1M, compared to our revenue estimate of $200.3M and adjusted EBITDA of $12.6M,” the analyst noted. “The FQ2 net revenue represented an increase of 34% Y/Y. Company-wide adjusted gross margin of 26.9% was below our estimate of 32.0% and down from 28.6% in the prior year. The lower gross margin led to a decline in adjusted EBITDA margin year-over-year to 5.2% from 8.1%. Tilray finished the period with cash and marketable securities of approximately $261.4M and debt of $454.4M. We have updated our model to reflect the Q2 results and tweaked our forward estimates, with no major changes. Our revenue and EBITDA dip slightly following this quarter’s results relative to our forecast while also factoring in the additional $5M in cost savings management outlined.”

In a research update to clients January 9, the analyst maintained his “Hold” rating and price target of (US) $2.00 on TLRY, implying a return of negative six per cent at the time of publication.

Gilmer thinks TLRY will post Adjusted EBITDA of $63.2-million on revenue of $786.4-million in fiscal 2024. He expects those numbers will improve to $92.7-million on a topline of $878.9-million the following year.

“Tilray is the market share leader in the Canadian landscape, solidified by the Hexo acquisition. We are encouraged by the international opportunities, as well as expanding beverage segment in the United States. However, we remain cautious on the overall Canadian landscape and the lack of sustainable 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 and improving cash flow generation,” the analyst concluded.