Analyst Stays Cautious Ahead of November Quarter Earnings

Before Monday’s (Jan 10) trading truly kicks into action, Tilray (TLRY) will release its November (F2Q22) quarter results.

Ahead of the print, Cantor’s Pablo Zuanic believes the trends are not tilting in the Canadian LP’s favor. “Unless the company issues bullish forward commentary, we expect the stock to face pressure from the November quarter print,” the analyst forewarned.

While Zuanic notes that cannabis makes up less than half of the company’s sales (in the August quarter they accounted for 42% of total revs), he is less focused on the metrics of the non-cannabis elements – such as CC Pharma, craft beer, hemp food – preferring to gauge the company’s health through the prism of the cannabis business.

And according to Hifyre, the top-line action has not been all that great. In the November quarter, recreational sales saw a sequential drop of 16%, despite the market overall growing by 5%.

The trends for December are not very promising, either, with Hifyre data showing sales dropped by 3% month-over-month as the market saw growth of 8%.

While Zuanic concedes that in December Tilray still held the #1 position in rec, it only claimed a 10.8% share, with the figure amounting to an 8-point year-over-year drop. However, Zuanic does note that TLRY’s share may be higher as Hifyre “tends to underestimate Quebeq exposure, where we understand TLRY is overindexed vs. most peers ex-HEXO.”

As for the other indicators, Zuanic expects export trends to remain “stable” although he is concerned that based on “operating deleverage and ongoing price deflation,” cannabis gross margins could drop from the August quarter’s 43%.

Where the headline numbers are concerned (which Zuanic calls “less relevant”), he projects total sales of $163 million and total EBITDA of $10 million, compared to the Street’s forecast of $174 million and $14 million, respectively.

Overall, Zuanic believes Tilray’s cannabis business is currently valued “well above the peer group average,” and as such, the analyst rates TLRY as a Neutral (i.e., Hold), while the price target gets a trim from $11.80 to $7.40. Nevertheless, there’s still upside of 15% from current levels. (To watch Zuanic’s track record, click here)

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Rating wise, Zuanic’ colleagues agree. Barring 1 Buy and Sell, each, all 5 others say Hold, culminating in a Hold consensus rating. However, the average target remains a bullish one; at $10.52, investors could see returns of 64% over the one-year timeframe. (See Tilray stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.