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Why Tilray, Organigram, and Hexo Stocks Bounced Today

By Howard Smith – Jan 11, 2022 at 9:20AM

Key Points

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Consecutive days of solid earnings in the Canadian cannabis sector has investors feeling better.

What happened

Canadian cannabis company Tilray (TLRY 0.40%) reported its fiscal 2022 second-quarter earnings results yesterday, and its shares soared. The company surprised investors with a profitable quarter and strong revenue growth. Today, Tilray peer Organigram Holdings (OGI 0.39%) also reported solid quarterly results. While shares of companies in the sector initially gave back some of yesterday's gains, they reversed course quickly. As of 1:52 p.m. ET Tuesday, shares of Tilray and Organigram were up 2.9% and 2%, respectively. The stock of fellow Canadian grower Hexo (HEXO -0.74%) was marching even higher at that time, up 5.7%. 

So what

Tilray said yesterday its revenue increased about 20% over the comparable prior-year period. Organigram similarly reported a year-over-year gross revenue increase of 23% in today's announcement. Both companies say international sales are also contributing to improving results. 

Greenhouse full of marijuana plants.

Image source: Getty Images.

Now what

Tilray CEO Irwin Simon told investors that the company maintained its position as the leading market share holder in Canada. But it also holds 20% market share in Germany's medical cannabis market. Referring to continued growth in the European country, he added, "We believe this, coupled with our infrastructure, will also allow us to capture the adult-use market as legalization accelerates under the new coalition government."

For its part, Organigram said it has increased its market share in Canada to 7.5%, up more than 300 basis points compared to the year-ago quarter. While it still reported a net loss in the most recent quarterly reporting period, the company said its adjusted gross margin jumped 181% year over year.

Subsequent to the close of the quarter, Organigram acquired Quebec-based craft cannabis licensed producer Laurentian Organic for a combination of cash and stock. Organigram said it will add the equivalent of another 20% on top of that purchase price to invest further into Laurentian "to drive cultivation growth, expand processing and storage space and invest in automation." That acquisition and additional investment will help the company to achieve "significantly higher" revenue in the current quarter compared to the prior-year period. 

The results reported yesterday and today also reinforce what Hexo said in its quarterly financial report last month. Hexo saw total net revenue jump 70% in its fiscal 2022 first quarter ended Oct. 31, 2021, over its fiscal 2021 first quarter. Investors have beaten down the shares of many Canadian cannabis companies as competition has grown and product pricing has been under pressure. But recent results seem to have investors thinking the shares have dropped enough, and stocks of these names are moving higher today. 

Howard Smith owns Tilray, Inc. The Motley Fool owns and recommends OrganiGram Holdings. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy.

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