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Is Tilray Stock a Buy?

By Zhiyuan Sun - Updated Mar 7, 2021 at 9:57AM

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It's not the worst idea to invest in the world's largest marijuana grower by revenue.

Canadian weed giant Tilray (TLRY) was on a tear for much of 2020. Despite the stock market woes of the past week, its shares have gone up nearly 60% over the past 12 months, making it one of the top performers in the industry benchmark Horizons Marijuana Life Sciences Index ETF, which returned 46% over the same period. 

Investors have a lot to be thrilled about with Tilray, the most promising of which is its substantial international presence, which will become a game-changer as more countries legalize the recreational and medical use of cannabis. Let's investigate how Tilray can capitalize on marijuana's entry to the mainstream.

Man inspecting the quality of cannabis plants in a field.

Image source: Getty Images.

An exciting cannabis company 

Last year, Tilray grew its revenue by 26% from 2019, reaching $210.5 million. It is also near the finish line in terms of achieving profitability. During Q4 2020 (ended Dec. 31), its net loss narrowed to just $3 million from $219.8 million in the prior-year quarter.

The company terminated a bulk cannabis supply agreement, and as a result, only managed to sell 6,901 kilograms (kg) of dried cannabis in Q4 2020 compared to 15,039 kg in Q4 2019. However, Tilray is seeing more demand for high-priced, highly tetrahydrocannabinol (THC)-potent adult brands. The net selling price of its cannabis went up to $5.97 per gram compared to $1.88 a year earlier. Also, it brought its total store count to 1,318, up from 800 a year ago. 

By the end of the year, the company will be merging with fellow Canadian cannabis producer Aphria (APHA) to create the biggest marijuana company globally, with $658 million in combined revenue during the past 12 months. Over the next two years, the two companies could realize up to 100 million Canadian dollars in acquisition synergies (such as joining corporate offices together).

What's more, the two marijuana producers will have the biggest market share in Canada, accounting for 17% of all cannabis sales volume in the country. That's 7 percentage points higher than the next biggest leading competitor, which is Canopy Growth (CGC -0.42%).

Should you give Tilray a shot? 

Right now, Tilray is pretty expensive, trading at 15 times revenue. Even some of the fastest-growing cannabis companies -- like Green Thumb Industries (GTBIF -1.30%)Trulieve (TCNNF -0.34%), and Curaleaf (CURLF 1.39%) -- are only valued between 10 and 15 times sales. What makes Tilray special, however, is its vast international presence. The company has medical cannabis operations in over 17 countries.

Over half of Aphria's CA$160.5 million in quarterly net sales comes from its distribution of cannabis to over 13,000 pharmacies in Germany. Additionally, the two companies also have a sizable presence in the U.S. Tilray's Manitoba subsidiary generates about $77 million per year in cannabidiol (CBD) revenue. Meanwhile, Aphria's SweetWater Brewing subsidiary posted $66 million in sales in 2019 and has its products in more than 29,000 restaurants, retailers, and bars nationwide.

After the merger, Tilray will offer a near-complete collection of marijuana products, including flowers, pre-rolls, oils, capsules, vapes, edibles, beverages, and medical options, missing only cannabis-based pharmaceutical drugs. Given its opportunity to scale just about every segment of its operations on an international level, this is definitely a marijuana stock you don't want to miss.  

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Stocks Mentioned

Tilray Stock Quote
Canopy Growth Stock Quote
Canopy Growth
$5.89 (-0.42%) $0.03
Aphria Stock Quote
Trulieve Cannabis Stock Quote
Trulieve Cannabis
$14.72 (-0.34%) $0.05
Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
$6.00 (1.39%) $0.08
Green Thumb Industries Stock Quote
Green Thumb Industries
$12.95 (-1.30%) $0.17
Horizons Marijuana Life Sciences Index ETF Stock Quote
Horizons Marijuana Life Sciences Index ETF
$4.49 (2.04%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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