Shares of Tilray Inc. (TLRY) were 13.7% higher as of 3:10 p.m. EDT on Tuesday. The Canadian marijuana grower announced that it has shipped its Tilray 2:100 cannabidiol (CBD) oil product to the United Kingdom. However, this shipment was to only one epilepsy patient in the U.K. Was this big enough news to move the needle for the stock? Not really.
It seems likely that today's move was primarily a result of continued momentum as institutional investors and retail investors alike scoop up shares of Tilray. The news about the CBD oil shipment to the U.K., while not all that significant, was nonetheless another reminder of the potential for Tilray in the global medical marijuana market.
This marks the second consecutive day this week that Tilray has racked up double-digit percentage gains. The stock reached all-time highs last week, but today's big jump set a new record. Tilray's market cap right now is at $9 billion, making it the second-biggest marijuana stock in the world.
Canadian marijuana stocks, in general, have had a nice run since mid-August following the announcement that Constellation Brands invested an additional $4 billion in Canopy Growth. Tilray's gains, however, have far surpassed all of its peers', including Canopy.
Why has Tilray received such a larger boost than others? One likely reason is that the stock trades on a U.S. stock exchange. The three biggest marijuana stock winners of the last few weeks, Tilray, Canopy, and Cronos Group, not so coincidentally, are the only Canadian marijuana stocks trading on U.S. stock exchanges.
Also, while Canopy has already basked in the glory of Constellation selecting it as a cannabis partner and making a huge investment, many investors are eagerly awaiting the next big deal. Diageo is reportedly looking to follow in Constellation's footsteps. Other major alcoholic beverage companies and big tobacco companies might not be too far behind. Tilray would almost certainly be among the top candidates for any of these companies to consider.
I don't think that Tilray's momentum is sustainable. However, in the short term, it's quite possible that the stock will continue to move higher.
My view is that buying Tilray at its current valuation would be ill-advised. The company has great growth prospects with the Canadian recreational marijuana market opening next month and increasing opportunities globally to export medical cannabis. But I think Tilray's stock has gotten way ahead of its business prospects after the tremendous gains over the last month.