Tilray Stock Up 16% Yesterday – Time to Buy TLRY Stock?
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The price of Tilray stock jumped as much as 16% yesterday at $11.7 per share following news that the company appointed a new president for its Canada unit.
According to the press release, Blair MacNeil will from now on preside over the company’s operations in this country. MacNeil’s prior experiences include leading Bacardi’s Canadian unit while he has an extensive track record in the alcoholic beverages sector.
Irwin D. Simon, Tilray’s Chief Executive, stated: “Blair MacNeil has a proven track record in driving accelerated growth for industry-leading brands, and we are thrilled to welcome him to our senior leadership team”.
He added: “His extensive experience in growing consumer loved brands will further advance our growth strategy and expand our presence across Canada to reach our 30% market share goal by the end of fiscal year 2024. We would also like to congratulate Jim on his well-deserved promotion”.
Can this announcement lift the price of Tilray stock in the following days after a disappointing Q1 2022 earnings report? In the following article, I’ll be assessing the price action and fundamentals of this cannabis stock to outline plausible scenarios for the future.
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Tilray Stock – Technical Analysis
Yesterday’s trading volumes were among the most notable developments concerning Tilray’s price action as nearly 69 million shares of the cannabis company exchanged hands during the session – a figure that is more than 3 times higher than the 10-day average.
The price of Tilray stock has been consolidating for months and may be ready for a strong move upon reaching the tip of the falling wedge formation shown in the chart. At this point, a break in any direction seems imminent and yesterday’s session might be an indication of what is coming.
Thus far, the price is trading only 4% below its 50-day simple moving average and has already broken the 20-day SMA. Meanwhile, it remains 34% below its 200-day moving average, which reflects the market’s skepticism about the firm’s future.
Momentum oscillators revived to some extent yesterday. The Relative Strength Index (RSI) made a notable jump above the 50 level – typically a buy signal – while the MACD remains in negative territory but histogram readings have turned positive.
Moving forward, a break above the 50-day SMA would confirm a bullish outlook for the stock as it would be accompanied by a reversal of a long-dated downtrend that started after the short-squeezing frenzy of January-February.
Tilray Stock – Fundamental Analysis
In a previous article, we highlighted that Tilray remains a highly volatile investment due to the company’s inability to post a profit that does not involve some accounting trick. The previous quarter was an example of this as the firm reported wider than expected losses per share of $0.08 compared to the 9 cents consensus estimate from analysts.
Alongside this bottom-line figure, the company reported a 43% year-on-year jump in its sales resulting from higher post-pandemic demand, with Tilray’s top-line results landing at $168 million.
Meanwhile, the firm reported its 10th consecutive quarter of positive adjusted EBITDA. This figure stood at $12.7 million for the quarter compared to $8 million reported during the same period a year ago.
Using a simple run rate of this number, we get that Tilray, upon completing its merger with Aphria, may produce around $50 million per year in adjusted EBITDA. According to Koyfin, the enterprise value of the firm currently stands at $5.97 billion. This results in an EV-to-EBITDA figure of nearly 120 times.
Meanwhile, the forward price-to-sales ratio for Tilray stands at 9.6 using its forecasted top-line results for the next twelve months.
Even though Tilray has a robust balance sheet and may become a leader in this growing industry, the current valuation seems to be pricing a very optimistic scenario for the company’s future profitability.
With this in mind, despite the bullish technical outlook that could come as a result of a break above the $12 level, Tilray’s long-term outlook remains highly uncertain and the stock price may continue to be very volatile in the future until the business reaches a more mature stage and its prospects become clearer.
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