Shares of Tilray (TLRY) fell more than 10% on Friday, after an analyst said investors should bet against the struggling cannabis company's stock. 

Vertical Group analyst Gordon Johnson thinks Tilray's second-quarter report was "an unmitigated disaster." Soaring costs resulted in a net loss of $35 million, or $0.36 per share, for the Canadian cannabis company.

Worse still, Johnson expects Tilray's operations to burn through $117 million in cash in 2019 and $192 million in 2020. Yet Tilray has only $221 million of cash and equivalents on its balance sheet. Thus, Johnson thinks Tilray could run out of money in the first half of 2020.

In turn, Johnson argues that Tilray should be valued based on its book value, or the value of its assets minus its liabilities. Essentially, Johnson is valuing Tilray's stock based on the company's liquidation value -- and he pegs that price at $4 per share.

With its shares trading above $30, Johnson went so far as to recommend that investors sell short, or bet against, Tilray's stock.

A keyboard button labeled sell

Image source: Getty Images.

Tilray certainly has its share of problems. Poor gross margins and surging operating costs suggest that the company is a long way away from becoming profitable. Moreover, the company is losing a lot of money, and its dwindling cash reserves may force Tilray to conduct a dilutive stock offering that could place even more pressure on its share price.

Yet even after its recent losses, Tilray's stock is still richly valued by most traditional metrics. As an example, Tilray is currently priced at more than 17 times its projected revenue in 2019. Johnson believes this is far too high a price to pay for the struggling cannabis company, and judging by the stock's losses on Friday, many investors agree with him.