Sunday, November 14, 2021 1:45:44 PM
TLRY Stock: Why Meme Traders Should Buy the Dip In Tilray
10/28/2021 6:00am EST
By Wayne Duggan, InvestorPlace Contributor
So-called meme stocks have a very bad reputation among experienced investors, and for good reason. However, Tilray (NASDAQ:TLRY) stock is one meme stock that is much more than a pump-and-dump scheme.
Tilray (TLRY) logo on a web browser.
Source: Jarretera / Shutterstock.com
I recently wrote a story comparing meme stocks GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC). I got a lot of grief for my belief that both AMC and GameStop are terrible long-term investments. But just because most meme stocks are garbage investments doesn’t mean all of them are.
TLRY stock skyrocketed from under $10 to as high as $67 in a matter of weeks in early 2021. Since that social media-fueled trading frenzy, Tilray shares have pulled back to under $11. They are now down 36% in the past six months alone.
I wouldn’t recommend buying the dip in most meme stocks. But there are several reasons why investors shouldn’t lump TLRY stock in with the rest of the meme stock pump-and-dumps.
TLRY Stock Merger Synergies
Tilray’s high-profile merger with Aphria closed in May. The Aphria merger creates unparalleled scale for Tilray among Canadian cannabis stocks. It also creates cost synergies that play an important role in Tilray’s important march to earnings before interest, taxes depreciation and amortization (EBITDA) profitability.
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“We anticipate multiple expansion as the potential Tilray/Aphria merger would enable the combined company to build scale, gain efficiencies, combine their cash position, and deliver consistent positive EBITDA,” Bank of America analyst Heather Balsky wrote in a research note.
Tilray has estimated the merger will create $80 million in synergies. In the first half of 2021, the company had realized only $55 million of those synergies, Balsky estimated.
“We assume a benefit starting in [the second half of the fiscal year] now that the company has turned through legacy-Tilray inventory,” she wrote.
Bank of America has a “buy” rating and $15 price target for TLRY stock.
International Growth Opportunities
Today, Canadian cannabis companies are primarily focused on growing revenue and market share in Canada. Canada legalized cannabis back in 2018. Up to this point, pricing and growth in the Canadian market has been a big disappointment for investors.
In the years following Canadian legalization, Aphria focused on flower and vape sales. Lately, the company has expanded into edibles. By contrast, Tilray has focused on an asset-light model centered on developing consumer brands with meaningful pricing power.
Aphria also had a large international distribution business, something that differentiated it from many Canadian cannabis peers. For now, Canadian growth is lagging. Federal cannabis reform in the U.S. has disappointed. International demand outside of the U.S. may be the best growth source for Canadian cannabis stocks like Tilray. In that sense, Aphria could be a critical growth source in the near-term.
U.S. Expansion Opportunities
If no for the legalization issue, the U.S. cannabis market would be the biggest and best opportunity in the North American cannabis market. Unfortunately, cannabis remains federally banned in the U.S. All Canadian cannabis companies can do is prepare to enter the U.S. market when and if legalization occurs.
Tilray took a major step in that direction in August when it acquired convertible notes representing a potential minority stake in U.S. multi-state cannabis operator Medmen Enterprises (OTC:MMNFF).
Morningstar analyst Kristoffer Inton says Tilray’s decision to issue undervalued shares to fund the Medmen investment wasn’t ideal.
“Nevertheless, we still see the deal as a net positive, accounting for about $1 to our fair value estimate while giving Tilray a toehold into the attractive U.S. market upon a change to federal law, which we view as likely by the end of calendar year 2023,” Inton wrote in a research note.
Inton says the U.S. market has the best growth potential of any global cannabis market.
“We expect federal law will eventually be changed to allow states to choose the legality of cannabis within their borders,” he says.
Morningstar has a “buy” rating and $17 fair value estimate for TLRY stock.
How To Play TLRY Stock
If you were trading TLRY stock as a meme stock in February, it’s a completely different investment these days. It may not be trending on social media. It may not have bullish momentum. And it probably won’t make you rich overnight.
But if you are looking for a high-quality play on a high-risk market like cannabis that has massive long-term growth potential, TLRY stock is a top-tier cannabis stock to buy on the dip.
On the date of publication, Wayne Duggan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is?the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.
Recent TLRY News
- Tilray Brands Leverages Hemp and Beverage Scale to Launch Hemp-Derived Delta-9 THC Drinks in Key Markets Across the United States • GlobeNewswire Inc. • 09/24/2024 11:00:00 AM
- Shock Top Announces its Official Craft Beer Sponsorship of University of Missouri Athletics • GlobeNewswire Inc. • 09/19/2024 11:12:39 AM
- Tilray Medical Launches Redecan Cannabis Brand in Australia • GlobeNewswire Inc. • 09/18/2024 11:00:00 AM
- Form PRE 14A - Other preliminary proxy statements • Edgar (US Regulatory) • 09/17/2024 08:08:50 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 09/17/2024 12:27:26 PM
- Form 424B7 - Prospectus [Rule 424(b)(7)] • Edgar (US Regulatory) • 09/17/2024 12:22:43 PM
- Tilray Brands Completes Acquisition of Atwater Brewery From Molson Coors Beverage Company • GlobeNewswire Inc. • 09/12/2024 08:05:00 PM
- Breckenridge Brewery Unveils Oktoberfest Brew and Hosts 28th Annual Oktoberfest Festival: A Weekend of Live Music, Traditional German Cuisine, and Tasty Brews in Breckenridge, Colorado • GlobeNewswire Inc. • 09/12/2024 11:00:00 AM
- Tilray Medical Supports Scientific Study on Fibromyalgia With Positive Outcomes: Effectiveness of Cannabinoids Treatment in Pain Management and Other Fibromyalgia-Associated Symptoms • GlobeNewswire Inc. • 09/09/2024 11:00:00 AM
- Tilray Brands Completes Acquisition of Craft Beer Brands and Breweries from Molson Coors Beverage Company • GlobeNewswire Inc. • 09/03/2024 02:33:24 PM
- High Volatility Expected in Nvidia Report, Ambarella Soars 20%, Hertz Strengthens Board, Apple Cuts Jobs • IH Market News • 08/28/2024 09:50:36 AM
- Breckenridge Brewery Announces Latest Concert Series With Kaleo, Hippo Campus and Cassandra Lewis • GlobeNewswire Inc. • 08/26/2024 11:00:00 AM
- Craft Cannabis Brand, Broken Coast, Launches Latest Artisanal Strain, ‘Milk & Cookies’ for Avid Indica Enthusiasts • GlobeNewswire Inc. • 08/22/2024 11:00:00 AM
- Solei Launches New THC Infused Sparkling Beverages and Topicals • GlobeNewswire Inc. • 08/15/2024 11:00:00 AM
- Shock Top and Gator Athletics Partner to Introduce First-Ever Craft Beer Sponsorship of the Florida Athletic Department • GlobeNewswire Inc. • 08/14/2024 11:00:00 AM
- UBS Beats Earnings Forecasts, Intel Divests Arm Holdings, Flutter Surges 9% in Premarket Trading, and More • IH Market News • 08/14/2024 09:56:35 AM
- Tilray Brands to Acquire Four Craft Beer Breweries from Molson Coors Beverage Company • GlobeNewswire Inc. • 08/13/2024 06:15:00 PM
- Breckenridge Distillery Partners with Denver Broncos Legends to Release Fourth Edition Broncos Country Bourbon Blends • GlobeNewswire Inc. • 08/08/2024 12:00:00 PM
- Move Over Pumpkin Spice, Shock Top Reclaims Autumn With the Return of Twisted Pretzel • GlobeNewswire Inc. • 08/08/2024 11:00:00 AM
- Breckenridge Brewery Opens New Location in Fort Collins, Colorado • GlobeNewswire Inc. • 08/05/2024 11:00:00 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/02/2024 08:08:13 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/30/2024 10:35:16 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/30/2024 10:34:57 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/30/2024 10:34:33 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/30/2024 10:34:13 PM
FEATURED Cannabix Technologies and Omega Laboratories Inc. Advance Marijuana Breathalyzer Technology - Dr. Bruce Goldberger to Present at Society of Forensic Toxicologists Conference • Sep 24, 2024 8:50 AM
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