What happened
Shares of Tilray, Inc. (TLRY) were up 10.8% as of 3:21 p.m. EDT on Monday following a double-digit percentage drop on Friday. Tilray's big bounce back came as a result of a report by BNN Bloomberg TV that Coca-Cola is in discussions with Aurora Cannabis (ACB 12.87%) about developing cannabis-infused beverages. Shares of Aurora Cannabis soared 19% on the report.
So what
It makes sense that Aurora Cannabis stock would jump on the news of a potential deal with Coca-Cola, but why Tilray? Investors were apparently thinking that what's good for the goose is good for the gander.
Image source: Getty Images.
Tilray is neck-and-neck with Canopy Growth as the top marijuana stock in terms of market cap. Aurora Cannabis ranks third. Canopy already scored a deal with big alcoholic beverage maker Constellation Brands to develop cannabis-infused beverages. If Aurora lands a partnership with Coke, there's probably a good chance that Tilray could be next.
Beverage companies might have to begin taking a number to strike deals with the top Canadian marijuana growers. Diageo is also reportedly in talks about partnering to develop cannabis-infused drinks. Tilray CEO Brendan Kennedy mentioned in the company's Q2 conference call that other big companies are likely to make deals with cannabis growers in the next few months. It appears that his prediction could come true sooner rather than later.
Now what
I agree with Tilray's CEO that we'll see even more deals and rumors of deals between large beverage makers and Canadian marijuana growers. There is likely going to be enormous peer pressure on those companies that haven't already forged alliances with marijuana growers to find cannabis partners. It's too soon to know just how large the cannabis-infused beverage market will be, but beverage companies won't want to be left behind.
That's great news for Tilray and its peers that haven't already inked agreements with major players outside of the cannabis industry. I wouldn't be surprised for the anticipation of such a deal to continue to serve as a catalyst for Tilray's share price. However, Tilray already claims an astronomical valuation after its huge run-up over the last month or so. My view is the stock is still due for a major pullback despite the tremendous long-term potential for the global cannabis industry.
