Tilray Brands (TLRY 2.15%) has been the top Canadian cannabis producer since its acquisition of rival Aphria last year. After the transaction, the company called itself the "Global Cannabis Leader." In terms of revenue, there are multi-state operators in the U.S. that generate more, but Tilray is arguably more diverse, with operations in many parts of the world.
Unfortunately, that leadership has not been enough to prevent the stock from going into a freefall in the past year, along with other marijuana stocks. Below, I'll look at whether investors would have been better off buying the stock in 2018, before Canada's pot market fully opened up.
Tilray's stock was once worth $300
Canada legalized recreational marijuana in October 2018. Around that time, there was still plenty of optimism around pot stocks and their long-term potential. On Sept. 19, 2018, Tilray hit an intraday high of $300 per share as its then-CEO Brendan Kennedy suggested big pharma should partner with marijuana companies. Those comments led to a short squeeze, allowing the stock to pop and hit a level it might never reach again.
Even though it declined significantly, the stock remained at around $150 a month later. By the end of the year, it split in half once more and finished at just over $70 per share.
Image source: Getty Images.
A $10,000 investment then would be worth no more than $3,000 right now
Today, Tilray's stock trades around $6 per share. Even if you bought the stock at its low on the first day of trading on the Nasdaq on July 19, 2018, when it was at just over $20, that would still equate to a loss of 70%. If you didn't buy right on day one, your losses would be even larger. If you bought at the peak, the $300 price tag would have allowed you to buy just 33.3 shares of Tilray, which would be worth about $200 today. Waiting until legalization would have allowed you to buy double the number of shares at a lower price of approximately $150, but 66.7 shares would still only have a modest value of $400 today.
The sudden and rapid decline over the past few years may not have found a bottom yet. In the Canadian marijuana industry, there are too many producers vying for too small of a market, making it difficult for a top company like Tilray to grow its market share. In its most recent quarterly results, for the period ended Nov. 30, 2021, the company's net sales of $155 million declined 8% from the $168 million the business reported earlier.
Is Tilray a better buy now?
Today, Tilray trades at a relatively modest 3.8 times its revenue. That's dirt cheap compared to what investors were paying for the stock just a few years ago.
TLRY PS Ratio data by YCharts
However, investors need to remain cautious. If revenue doesn't increase as the company hopes, there may not be a reason to pay a higher premium for the pot stock. U.S. legalization of marijuana would open the doors for Tilray and other Canadian producers to enter the market, but there's no timetable on when that might be.
If you're bullish about the company hitting its forecast of $4 billion in annual revenue by 2024, the stock could certainly look like a bargain in a few years. But if you're skeptical, like I am, it may be safer to wait for at least some signs that the company is on the right track and likely to hit its goal. As of now, there's still too much risk in Tilray and other Canadian cannabis producers to make them attractive buys.
