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TLRY Stock: It Can’t Get Worse Than This For Tilray


Tilray (NASDAQ:TLRY) illustrated the long and painful history of the commercial cannabis industry. TLRY stock hit $150 per share after its IPO in 2018. Since then, incredibly enough, Tilray has lost 98% of its value from the peak.

Based just off the stock chart, it looks like Tilray is a bankrupt company. And he certainly has issues. Despite the booming size of the marijuana industry, Tilray has yet to achieve consistent profitability.

Teleprinter Company Current price
TLRY Tilray $3.53

First, the bad news

As our Mark Hake noted, Tilray continues to lose money. It’s not just on an accounting basis either. Tilray also generated negative free cash flow (FCF) of $51 million last quarter. Annualized, that would be over $200 million in releases. And, with a recession looking imminent, consumers could cut spending on discretionary goods such as cannabis, further impacting Tilray’s cash flow.

Tilray has struggled with profitability because it has simply built a larger footprint than the market can currently support. Tilray is proud to build a global cannabis business with operations in Canada, the Americas, Europe and more. But putting all the people and logistics in place for that is expensive. Tilray is also expanding into other cannabis products, beverages and more. Add to that a weak Canadian retail marijuana market, and it’s been tough on the company.

Investment bank Piper Sandler added to the bad news. Their analyst recently cut the TLRY stock price target from $6 to just $3. Their downgrade pointed to weakening sales momentum for Tilray as well as unfavorable currency fluctuations as factors that could hurt Tilray’s near-term results. This is all valid, but a target price reduction of 50% seems overkill simply on these concerns.

Improving management discipline

The most important factor for a potential turnaround for Tilray is that the company has learned from past mistakes. Tilray isn’t spending as aggressively on new ventures. Instead, it focused on more cautious and rational action while developing at a more measured pace.

CEO Irwin Simon hit the nail on the head during the company’s latest conference call. Here’s Simon talking about potential acquisitions for Tilray:

“[T]rust me, we see lots of acquisitions in vegetable products, in spirits, in beer, in beverages, in cannabis, in CBD… but making a bad acquisition would not be good for us. And there are a lot of acquisitions that we looked at and some of the best acquisitions are the ones that we walked away from.

It is the voice of an experienced operator. Tilray has already spent its capital poorly on projects that have failed to live up to their potential. Now, however, the company is taking a much more disciplined approach to spending its funds.

And, it’s important to note that Tilray is in a privileged position. It has cash and already has a sufficient scale of operation. Tilray is one of the biggest cannabis companies in the world, so it doesn’t have to make any rash moves to stay viable. It can take its time and deploy capital only when the time is right.

Positive signs for Tilray

Although TLRY’s share price has hit new lows, there are potential upsides. On the one hand, Tilray remains on track to meet its longer-term revenue goals of $4 billion per year by the end of 2024. As Tilray uses greater cost discipline, this level of income should allow it to generate significant profits.

On the other hand, short-term trading sentiment is completely wiped out. Shares are down 17% just in the past month and 52% since the start of the year. However, the bears did not give up. In fact, short interest jumped to 14% of float. This could set the stage for a strong rebound if the shorts overshoot their welcome once sentiment starts to turn around.

TLRY Stock Verdict

To be clear, Tilray still faces a series of longer-term challenges and hurdles. The company’s ultimate success remains an open question.

However, with shares now down to just $3, it’s hard to see how much more they’ll drop in the near term. If you want to see the surrender, this is what it looks like. The 50% reduction in Piper Sandler’s price target this week puts a decisive exclamation mark on this.

So is Tilray a great long-term investment? Only time will tell. Is this a tempting short-term swing trade? Absolutely. TLRY stock could easily rally to $4 or even $5 in the coming weeks once this current market rout is finally over.

As of the date of publication, Ian Bezek had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Ian Bezek has written over 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a $300 million New York-based hedge fund. You can reach him on Twitter at @irbezek.

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