Tilray Stock Fundamental Analysis: Profits Elusive

Tilray stock began trading in July 2018. Shares of the company speared higher in September — a run during which the stock surged to $300 before nuking most of those gains two days later. Since then, TLRY stock has mostly drifted lower.

As with much of the marijuana industry, Tilray is losing money as it tries to expand in Canada and globally, while bringing more production facilities online. The company has a presence, of some kind, in 12 countries. But it has lost money over the past four quarters.

Earnings growth is a staple of top stocks. But Tilray's EPS Rating stands at 1, with 99 being the best possible. Other marijuana stocks also have weak profit ratings. The EPS Rating is a gauge of a company's profit growth.

Tilray reported a 27 cent per-share loss during the first quarter, results of which the company reported in early May. The loss was worse than expected, according to Zacks.

But sales growth has been torrid, albeit from a very low base. Sales surged 195% to $23 million in the latest quarter. That's a small total amount of sales, especially when compared with Tilray stock's market cap of $3.6 billion. However, powerful sales growth is a key metric when a company isn't profitable and can lead to profitable gains if the technical analysis of the stock proves positive.

Tilray Stock Technical Analysis

The Composite Rating of Tilray stock stands at 7, which is also weak, according to Marketsmith. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.

Along with the stock action, Tilray's relative strength line has settled lower. The trend indicates that TLRY stock has underperformed the S&P 500.

Tilray also compares poorly to some rival marijuana stocks. Innovative Industrial Properties (IIPR), a profitable cannabis-focused real estate investment trust, has a 98 Composite Rating. Its EPS Rating is 80. Innovative Industrial Properties stock is consolidating near a buy point.

Canopy Growth (CGC) has a Composite Rating of 58 and a 32 EPS Rating. Aurora Cannabis (ACB) has a Composite Rating of 55. But its EPS Rating is nearly as bad as Tilray's, at 3.

The stock continues to trend lower and has not formed a price consolidation since its IPO base after it first began trading.

Tilray News

Tilray has struck deals to pack hemp CBD products into more U.S. retail outlets. But the company in May warned that the weed shortages in Canada, its home turf, could endure longer than expected. The company said another 18-24 months might be needed before supply and the demand even out in Canada. That timeline was longer than the company's earlier expectations.

Since recreational pot sales began in Canada in October, the nation has suffered from shortages, as license applications clog the regulatory system and marijuana producers run up against packaging regulations and processing and distribution choke points.

Still, while Tilray works to churn more weed out of more production facilities, longer-term, the company wants to have most of its cannabis grown for it by others. Management said the company in recent months has struggled to find product from third-party suppliers that meets its standards for quality.

To boost its production capacity, Tilray recently acquired Natura Naturals, which has a large cultivation center in Canada. And as interest in hemp and CBD grows, Tilray also bought the hemp-food company Manitoba Harvest.

Tilray Stock Is Not A Buy

Here's the bottom line: Tilray stock is not in any kind of base pattern. Its fundamentals are weak even compared to some other marijuana stocks. Thus, TLRY stock doesn't represent a buying opportunity as of late May.

Jefferies analysts have also said that Tilray trails its rivals in the medical marijuana business. And after many investors defined Canada's pot companies by their ability to strike a deal with a mainstream beverage, tobacco or pharmaceutical company, analysts at Jefferies said Tilray's beverage-focused research deal with Anheuser Busch InBev(BUD) was overrated.

However, Piper Jaffray analyst Michael Lavery in April said the AB-InBev deal worked in Tilray's favor. He also said its partnership with a segment of drugmaker Novartis (NVS) positioned the company well globally.

Still, Tilray stock is volatile. And it has been more sensitive to price swings in the past than other companies, due to its thinner share volumes. IBD advises investors, for now, to treat marijuana stocks like other rapidly growing companies — like recent tech IPOs — that are losing money.

Lavery, in a research note published after Tilray's earnings in May, cautioned investors not to expect the company to get out of the red soon.

"We expect Tilray to remain in investment mode to drive growth and do not expect positive earnings in near-term," he said in the research note. "The Canadian market may become profitable as it ramps up, but we do not expect positive total company EBITDA over the next 5-7 quarters."