When Tilray Brands (TLRY -18.02%) came out with its $4 billion revenue forecast for 2024, I knew it was the mother of all long shots. Too much would need to go right for the company to hit that target, including U.S. legalization of marijuana. The danger of a forecast like that is it can set the stock up for some overly aggressive expectations that it has little hope of meeting. There's simply no good reason for being so bullish and optimistic given the lack of progress on efforts to legalize marijuana around the world, especially in the U.S.
Reaching $1 billion is a much more realistic goal for the company. However, analysts don't even think that's going to happen anytime soon. It's important for investors to adjust their expectations for Tilray -- otherwise they could be in for a huge disappointment later on.
The company gives up on its forecast?
According to a report from MjBizDaily citing information from Cantor Fitzgerald, management at Tilray has dropped its $4 billion revenue projection for 2024. There wasn't any updated forecast given, and there's been no press release on the issue either. However, the company has mentioned in the past that legalization efforts in the U.S. haven't been going as hoped.
Ultimately, this shouldn't come as a surprise. Chief Executive Officer Irwin Simon said on the company's earnings call in January that he's "frustrated that legalization or nothing, whether it's SAFE Bank, whether it's MORE Act, whether it's the descheduling, whatever, nothing has happened within cannabis."
And if legalization doesn't become a reality in the U.S., there's simply no way for the company to even have a shot at reaching its $4 billion target. That's why I fully expected the company to withdraw its forecast at some point this year because the prospects for legalization don't look any better now that Republicans have regained control of the U.S. House of Representatives.
Analysts don't even think $1 billion is realistic
A number of analysts believe that Tilray will generate less than $700 million in sales in 2024. Not only is that nowhere near $4 billion, it is well shy of even $1 billion. However, those forecasts are much more realistic given that Tilray has reported $603 million in revenue over the trailing 12 months.
The problem is that it's difficult to predict where Tilray's top line will go -- it has been falling in recent quarters, and there's little reason to expect that trend will change anytime soon.
TLRY Revenue (Quarterly YoY Growth) data by YCharts
The one exception is that if the company acquires other businesses that help its growth, then getting to the $700 million mark and perhaps more could become a lot more realistic. But that's the only way I see the business increasing its top line in the near future.
Is there any reason to invest in Tilray's stock today?
Tilray's stock has fallen about 60% in the past year. The only consolation for Tilray investors is that pot stocks south of the border have fared even worse, with the AdvisorShares Pure US Cannabis ETF declining by 72% during the same time frame. All in all, it hasn't been a good time to be holding cannabis stocks.
In Tilray's case, the company's growth opportunities are limited at this point. Throw in an overly bullish CEO who makes forecasts that might be more than just a little too optimistic and you have a stock that could be vulnerable to sell-offs. Until Tilray can find a way to consistently expand organically, investors are better off staying away from this troubled stock.
