What happened
Tilray (TLRY 0.58%), a Canadian cannabis company, saw its shares drop 10.1% on Thursday. The stock, which closed at $7.25 on Wednesday, opened at $7.12 on Thursday and fell to $6.40 at one point. The stock has a 52-week low of $4.78 and a high of $23.04. The company's shares are down more than 7% this year but up more than 20% this month.
Image source: Getty Images.
So what
Investors likely took profits after Tilray got a bump on Wednesday following its third-quarter earnings report, which contained mostly good news. The company reported revenue of $152 million, which, while down from $155 million in second-quarter revenue, was up 23% year over year.
More importantly, Tilray reported net income of $52.5 million compared to a loss of $273.52 million in the same period last year, with earnings per share (EPS) of $0.09 compared to a loss of $1.03 per share. It was the company's 12th consecutive quarter of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
In the third-quarter earnings call, CEO Irwin D. Simon said the company was shooting for $4 billion in annual revenue by the end of 2024, citing its merger with Aphria as one of the driving forces toward that goal. The company has a strong position in Europe, with a 20% market share in Germany, and a market-leading 10.2% share among Canadian cannabis companies.
The strength of the company's numbers puts it in a good position to be ready for federal legalization of marijuana in the United States.
It already has a strong presence in the U.S. with its SweetWater Brewing, an Atlanta business that is the 11th largest craft brewer in the U.S.; the Breckenridge Distillery in Colorado, known for its craft bourbons; and Manitoba Harvest, which ships hemp, CBD, and wellness products to the United States. It also acquired a majority position in MedMen Enterprises last summer, giving it a starting point of 24 retail locations in seven states.
Now what
Investors will be watching carefully to see how the cannabis company's various mergers and acquisitions work out, particularly its proposed alliance with troubled Canadian cannabis company HEXO. Tilray bought out $211.3 million of HEXO's debt, with the right to convert the debt into 37% of HEXO's shares. The hope is that the two companies would then find 50 million Canadian dollars ($40 million) in savings over the next two years because of various synergies.
