With its stock up by 85% in the last 30 days alone, the global marijuana magnate Tilray Brands (TLRY -0.28%) is on a hot streak, to say the least. Between the start of a bounceback in the North American marijuana market, the end of the bear market, and big strategic plays, this company is quickly shedding the afflictions that kept its stock in decline over the last few years.
But there are a lot of ins and outs to be aware of with this company, and its multiple lines of business and multiple geographical segments can make it hard to unpack everything important. So let's investigate three things that smart investors likely appreciate about Tilray that other investors may not yet fully know.
1. Its cannabis segment is finally recovering
After a period of stagnation and decline, Tilray's cannabis revenue is finally starting to grow with gusto again. Per its fiscal fourth-quarter earnings for 2023, its cannabis sales rose by 21% to reach $64 million. For reference, its top line for the quarter was $184 million. Furthermore, its cannabis gross margin is recovering robustly, reaching 61% on a non-adjusted basis. So wise investors know that actual earnings growth is getting closer and closer.
Importantly, the marijuana segment's growth is being powered by gains in its market share in Canada, where it controls 13% of the market, up from 10% a few quarters ago. At the same time, the average selling price of a gram of cannabis has yet to recover from its lows in Canada. When it does, it'll make things a lot easier for Tilray because it'll make more per sale, and that might juice earnings too.
2. Its alcohol business is becoming a big driver of growth
While Tilray's reputation is historically rooted in its expansive multinational marijuana cultivation, manufacturing, and sales operations, over the last couple of years it embarked on a diversification play that saw it buying up beer brewers and distilleries in hopes of becoming a major alcohol business in the U.S. Smart investors were likely skeptical that its attempts to enter a crowded and intense market without any competitive advantage could possibly be successful.
But smart investors now recognize that its entry into selling alcohol has been a success -- and also that it's about to get even better. In Q4, it raked in 43% more booze sales, topping $32 million for the period. But those figures will likely rise sharply by the time the current quarter closes. Between its ongoing efforts to expand its brewing brands in the Northeast via entering state-level markets like Pennsylvania, building out its distribution infrastructure, and continuing with brand-building events like selling at big concerts, it could soon gain more market share.
Competing in alcohol is a net benefit for shareholders because it reduces the effect of detrimental legislation or market factors affecting the cannabis market. Plus, the more it can build up its presence in the U.S., if cannabis legalization occurs, it'll be well-positioned to distribute its marijuana products everywhere, which could be a major boon.
3. It just made yet another acquisition
Tilray has long pursued growth via tack-on acquisitions, and it just made a big one. On Aug. 7, the company reported that it would acquire eight of Anheuser-Busch's beer brands, massively expanding its portfolio of beers. Now, it expects to sell 12 million cases of beer annually, up from a mere 4 million in its fiscal 2023. That should mean it will bring in roughly $300 million in beer sales each year, per management.
It's unclear how much the company paid for the brands it bought from Anheuser-Busch. Still, in total, the acquisition should leave it with around 5% of the craft beer market in the U.S., which would make it the fifth-largest producer. Going from zero a few years ago to the fifth-largest brewer is nothing to sneeze at, and for smart investors the move is a strong sign that Tilray actually does have what it takes to be more than a marijuana grower alone.
