Canadian pot producer Tilray Inc. (NASDAQ:TLRY) has plunged almost 60 per cent since the start of 2019 and now the stock’s biggest bull has also slashed her target 60 per cent, but also believes the stock’s recent 52-week low is a buying opportunity.
Vivien Azer at Cowen & Co. had the highest 12-month price target for Tilray among her Wall Street peers at $150, but she recently cut that to just $60. While that is still double today’s value for the stock, it’s a sign that even the most bullish analyst on the British Columbia-based company has become concerned about its future.
Azer also trimmed her target on Cronos Group (TSX:CRON) to $17 from $21. In a note, she said the Canadian cannabis sector has faced challenges including a slow store rollout, supply shortages and a lack of novel products for sale like vape pens and edibles.
“We would argue that TLRY has been the most impacted by weak industry supply as its asset-light model was initially overly reliant on third-party supply,” Azer wrote.
Despite the price slash, Azer maintains her outperform rating on Tilray, noting its international opportunities and its entry into the American CBD market.
Price target of $150 was likely unrealistic
Tilray currently has a market cap of just under $3 billion, and if its shares reached $150, it would put its valuation at over $15 billion — well in excess of industry leading Canopy Growth Corp.‘s (NYSE:CGC)(TSX:WEED) market cap.
But for Tilray to reach that valuation, the company and the Canadian industry would have had to flourish out of the gate of legalization since last year.
And a lot has changed in that time. Back in September of 2018, Tilray reached its all-time high of $300, but the stock trades at less than 10 per cent that price today.
For investors, however, the stock doubling to $60 would still be fruitful. In fact, after Azer slashed her price target, shares of Tilray have jumped a whopping 19 per cent.
But with Tilray recording a net loss of more than $30 million in three straight quarters, it’s something that the company will need to improve on if it wants to be able to keep attracting investors. Even though rising costs have been the norm for cannabis companies in the nascent sector, it’s something that a large company like Tilray has to prove it can tame.
Tilray CEO Brenden Kennedy did tell Bloomberg News last month he expects the company to be profitable in Canada in the “next quarter or two.”
Cannabis 2.0 products could lift Tilray, pot stocks
For Azer the coming second-phase cannabis product launch in Canada by 2020 also leaves plenty room for optimism. She expects Cannabis 2.0 products will boost overall pot sales and forecasts the Canadian market will reach $12 billion by 2025.
She also maintains outperform ratings for Canopy and Aurora Cannabis (TSX:ACB)(NYSE:ACB), as she said the collapse of those two stocks, along with Tilray massive decline, makes for compelling values today.
With Tilray’s research partnership with Anheuser Busch Inbev, it could lead to some attractive infused beverage products for the Canadian market that could help excite investors again. While reaching $300 again may not be realistic, there are many growth opportunities ahead for the company. But it still needs to prove it can generate higher revenues and improve its bottom line before a large number of investors regain confidence in the pot producer.
Tilray offers a one-stop shop for our patients' medical needs, including vaporizers, lockable storage solutions and more. Find all of our accessories in the Tilray Shop: https://t.co/TtaJNTbR7g pic.twitter.com/4r8SufH0XD
— Tilray (@tilray) September 1, 2019
