Shares of Cannabis Producer Tilray Soar on Q2 Earnings Beat

Tilray shares jumped as much as 22% on Monday after the pharmaceutical and cannabis company surprised investors with a profit in the fiscal second quarter as a result of higher revenues and more cost-cutting.

The company, which provides pharmaceutical-grade cannabis products to patients, researchers, pharmacies, and governments said its net income increased to $6 million from a net loss of $89 million a year ago.

Tilray said its net revenue increased 20% to $155 million during the second quarter from $129 million a year ago. That also beat the ZACKS consensus estimate of $173 million.

The increase was driven by a 7% growth in cannabis revenue to $58.8 million, net beverage alcohol revenue of $13.7 million from SweetWater, and wellness segment revenue of $13.8 million from Manitoba Harvest.

According to ZACKS Research, Tilray also beat on earnings. The company reported break-even earnings while the Zacks Consensus Estimate was a loss of 9 cents.

The leading global cannabis-lifestyle and consumer packaged goods company said its adjusted EBITDA came in at $13.8 million in the second quarter 2022, up 8% compared to the preceding prior quarter, and the eleventh consecutive quarter of positive Adjusted EBITDA.

Following this, Tilray shares surged as much as 22% to CAD 9.92 on Monday.

Analyst Comments

“Based on Hifyre data, Tilray (TLRY) accounted for approximately 13% of all sales in the November-ended fiscal 2Q22 period, which marks a sequential decrease of 290 bps QoQ and an acceleration from the 130 bp QoQ share loss seen in fiscal 1Q. Having previously lowered our top-line estimates to reflect lower adult-use sales, we now lower our FY22 and FY23 adjusted EBITDA margin estimates for the company, driven by higher operating leverage, to 7.5% and 9.8%, respectively,” noted Vivien Azer, equity analyst at Cowen.

Tilray Stock Price Forecast

Seven analysts who offered stock ratings for Tilray in the last three months forecast the average price in 12 months of C$13.30 with a high forecast of C$27.82 and a low forecast of C$8.00.

The average price target represents a 40.63% change from the last price of C$9.46. From those seven analysts, one rated “Buy”, five rated “Hold” while one rated “Sell”, according to Tipranks.

CIBC cut the target price to $8 from $12. Alliance Global Partners lowered the target price to $7 from $12. Haywood Securities slashed the target price to $8 from $12.5. Piper Sandler cut the target price to $8 from $13.

Tilray has struggled to maintain its market share in the Canadian adult-use market and has been trending away from its target of 30%+ as of recent. The Company will likely turn to price competition or look to use the strength of its balance sheet for M&A to increase Canadian market share. Tilray does have a diversified revenue mix that will present an opportunity for growth as the Company continues to work towards optimizing its Canadian cannabis segment,” noted analysts at Haywood Securities.

“Additionally, Tilray’s position in the German medical market will become of increasing interest as the country has begun taking the steps towards adult-use legalization. We are lowering our target price to $8.00 (previously $12.50) based on lower estimates and a multiple of 5.5x F2023 revenue (previously 8x).”

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