Canadian cannabis producer Tilray Brands (TLRY) rose for a second day on Wednesday, reclaiming a long-term moving average. Is TLRY a buy now?
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Tilray Brands announced Tuesday that it has entered into a definitive agreement to acquire four craft breweries from Molson Coors Beverage Company (CRANE).
The acquisition includes Hop Valley Brewing Company, Terrapin Beer, Revolver Brewing and Atwater Brewery. The company did not provide financial details, but the deal is expected to close in August.
Shares rose nearly 3% on Wednesday, after rising 4.5% on Tuesday.
TLRY Stock Bumpy After Earnings Results
Tilray shares surged more than 10% on massive volume after the company reported better-than-expected fiscal fourth-quarter sales on July 29. The fiscal year ended May 31. Shares fell a few days later, breaking their 50-day moving average and 200-day moving average, but have since regained both lines, though the stock is still in an extended slump and trading below $2 per share.
The stock has risen 28% from its 52-week low of 1.50 in June 2023. But it still has a long way to go before it reaches its 52-week high of 3.40, reached on Sept. 5.
According to IBD MarketSurge, Tilray’s IBD Relative Strength Rating is 27 out of 99.
The stock’s decline over the past few years has been spectacular. Tilray went public in July 2018 at $17 a share and peaked at exactly $300 in September 2018.
Sales continue to grow, but the pace is slowing
Tilray’s fiscal fourth-quarter loss narrowed to 4 cents per share, compared with a loss of 15 cents in the year-ago quarter. Adjusted net income per share was 4 cents, compared with a loss of 2 cents in the year-ago quarter.
“In fiscal 2024, the company achieved notable growth across its businesses, with net sales up 26% year-over-year, record gross profit and adjusted EBITDA performance, and positive adjusted free cash flow for the year,” Chairman and CEO Irwin D. Simon said in the earnings report.
Net sales in the fourth quarter increased 25%, down from a 29% increase in the quarter ended February.
The company’s cannabis net sales grew 12% versus the prior-year quarter. Notable was beverage alcohol net sales growth of 137%, led by new products and contributions from the new Craft Acquisition brands.
FactSet estimates that revenue will rise 23% in the current quarter, before growth slows to 11% in the subsequent four periods.
Tilray maintained its top position in the Canadian cannabis market in the quarter ending May. It is also the European market leader in medical cannabis.
Tilray Waits for More States to Legalize
So far, 24 states and Washington, D.C., have legalized recreational marijuana use. Eleven states may legalize marijuana by 2024, with five states seeking to legalize medical cannabis and six others seeking to legalize adult use.
Florida, Idaho, Nebraska and South Dakota will attempt to put legalization before their voters on the November ballot, while state legislatures in the remaining seven states will decide the issue.
As the company awaits federal legalization of cannabis, it is expanding its presence in the alcoholic beverage sector and developing new products for further growth.
The strategy is to leverage its brands, infrastructure, expertise and capabilities to grow market share. Tilray’s growth plan focuses on new products and new geographies.
Fundamental Analysis of TLRY Stock
Earnings growth is a staple of top stocks. But Tilray’s EPS Rating has improved, but remains lackluster at 55 after its latest quarterly report. Other Canadian marijuana stocks also have lackluster or weak earnings ratings as they continue to lose money.
Tilray’s Composite Rating also strengthened, but remains weak at 46. According to IBD research, investors should focus on stocks with a Composite Rating of 90 or higher.
The company’s SMR rating, which measures revenue, profit margins and return on equity, is C. But its IBD Accumulation/Distribution rating of C+ indicates that there has been more institutional buying than selling over the past 13 weeks.
Is TLRY a bargain?
TLRY stock is not in a basic position and the chart remains weak. Therefore, Tilray stock is not a bargain at this time.
In addition, Tilray’s fundamentals still need significant improvement, including returning to sustainable profitability.
IBD advises investors to focus on stocks with stronger fundamentals that are moving into buy zones. Institutional investors also tend to avoid low-priced stocks like Tilray.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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