Tilray (NASDAQ: TLRY), the stock that investors and speculators can’t seem to get enough of right now, was reported as being worth more on paper than some of Canada’s leading established retail conglomerates such as Canadian Tire and Loblaw Companies Ltd. To put this in perspective, a company that sold roughly $18M US in cannabis in the past six months and just about the same amount doing so, is worth more than Loblaws, whose 2017 net profit was approximately 68x that. As Andy Bell of BNN reported this morning on BNN Bloomberg, short sellers of cannabis stocks in general have lost over $600M to date. Many are sticking to their guns, ie. that these companies stocks are over-priced and will ultimately have to drop in value. At current multiples, it would be hard to argue with their logic, but the shorts had a very bad day with Tilray yesterday, and the pain appears to be unabated this morning, as the stock is up another $13.oo as of this writing. Here are some views of prominent analysts yesterday.
Tilray Is Partying Like It’s 1999 (and It Won’t End Well)
Sean Williams, The Motley Fool
The baton has officially been passed. No longer are cryptocurrencies and blockchain the darlings of Wall Street. It’s now marijuana stocks.
It’s not hard to understand why pot stocks have ascended to the heavens since the beginning of 2016. Our neighbor to the north, Canada, passed legislation to legalize recreational marijuana in June. In a mere 28 days, on Oct. 17, recreational weed will go on sale in licensed dispensaries, opening the door to what should be billions of dollars in added annual sales, atop what the industry is already generating from medical pot sales and via exports to foreign countries that’ve legalized medical cannabis.
However, no two marijuana stocks are alike, and there have clearly been outperformers. For instance, no pot stock has done better (or even come close, for that matter) than Tilray (NASDAQ: TLRY) since its initial public offering on July 19. After pricing its shares at $17, Tilray hit $300 a share in intraday trading on Wednesday, Sept. 19. For those of you keeping score at home, we’re talking about a gain of more than 1,600% in a span of two months. With the exception of cryptocurrencies during the fourth quarter of last year, the last time we’ve witnessed a meteoric rise like this for an individual stock, and the industry as a whole, was during the dot-com boom in 1999.
To be clear, Tilray as a business is one that marijuana stock investors can come to appreciate. It was one of the first growers to receive a cultivation license from Health Canada, and it has therefore had more time than many of its peers to develop its brand and build a healthy patient following. Differentiation is incredibly hard to come by in the cannabis space, and Tilray is one of the few growers that’s been able to do it, thus far.
Tilray Soars ~60% on September 19—What Drove the Stock Up?
By Adam Jones, Market Realist
Tilray’s market capitalization on September 19 hovered around $23.4 billion, leading other US-listed cannabis stocks. Canopy Growth’s (CGC)(WEED) market cap is $12.3 billion, and Cronos Group’s (CRON) market cap is $2.6 billion. So, what boosted Tilray on September 19?
On September 19, several media outlets reported on Jim Cramer’s interview with Brenden Kennedy, Tilray’s CEO, on CNBC’s Mad Money. Kennedy noted that the marijuana industry could serve as a “hedge” for pharmaceutical and alcoholic beverage companies.
Kennedy explained, “Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you’re an investor in a pharmaceutical company or you’re a pharmaceutical company, you have to hedge the offset from cannabis substitution.”
Because medical cannabis (HMMJ) has already been established in several countries, its primary hurdle is the regulatory environment in the United States and similar markets. Investors seem to be betting on a future when those regulatory hurdles could be lifted, which could allow Tilray and its peers to have a pronounced presence in the United States.
Tilray’s ascent could be driven from the September 18 announcement that the company received approval from US regulators to import its cannabis drug for clinical trials. If the company succeeds in its clinical trials, the markets could see the expansive US medical market as a growth driver.
We believe that Tilray’s (TLRY) valuation looked stretched, with an NTM (next-12-months) enterprise-value-to-sales multiple of 115.8x. Aurora Cannabis’s (ACBFF) NTM enterprise-value-to-sales multiple is 18.4x, and Cronos Group’s NTM enterprise-value-to-sales multiple is 23.1x.