After Doubling in 2021, Will Tilray Stock Cool Off?
When many retail investors are looking out for the best marijuana stocks, the stocks which outperform their industry peers always tend to find their place at the top of the peoples’ watchlists. Cannabis stocks like Tilray (NASDAQ: TLRY) have been performing exceptionally well in the past few weeks. The Canadian cannabis giant is a producer of cannabis-based medicines, drugs, and oil products and is currently the largest marijuana company on earth, in terms of revenue, after its merger with Aphria. The most astonishing fact about it is Tilray has managed to deliver a striking 100% return just in a span of two weeks. But – after doubling in 2021, will Tilray stock cool off?
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Tilray’s Strategic Partnership with Aphria
Tilray had a challenging 2020. Due to the economic depression, the market for recreational and medical cannabis in Canada experienced a decline. These conditions proved to be a complete game-changer for the company and that is when it announced its merger with Aphria Inc. The combined entity would retain the name Tilray while the shareholders of Aphria would have a 62% stake in the merged company thereby making it a deal of reverse acquisition between Tilray and Aphria. The merger is expected to close by the Q2 of 2021 and Aphria’s CEO Irwin Simon will hold the position as the CEO and Chairman of the new company.
Investors’ immediate reaction though wasn’t extremely positive for this event. However, sentiment changed in 2021 and the New Year became a genuinely happy one for Tilray as the stock soared by more than 100% within the first two weeks of 2021.
A Huge TAM Opportunity in the US for Tilray
The US cannabis market continues to explode. As per New Frontier Data, the cannabis industry currently employs about 250,000 people and recreational and medical cannabis sales are up by 40% in 2020 in comparison to 2019. New Frontier believes the cannabis industry will generate an astounding $130 billion revenue for the US annually by 2025. People’s perception of pot continues to evolve and by 2024 it may even surpass the American’s annual spending on craft-beer.
Recent US elections certainly helped catalyze the superior growth potential of the marijuana stocks like Tilray. In the US, five states had voted for the legalization of medical as well as recreational marijuana on Election Day In fact, it was found nine-in-ten Americans favor legalization for recreation and medical purposes with 49% of the millennials consuming it for recreational reasons. Also, 27% of Adult Americans consume it several times a week.
All the above statistics indicate there is a huge demand for Cannabis in the US. But does that mean you should buy Tiray stock now?
TLRY Shows Signs of Recovery
2020 was not a very good year for Tilray. Its revenues fell sharply in the second quarter. In fact, the third quarter also saw only a 2% recovery in sales. However, despite this, the company made total annual savings of $54 million by the end of Q4 and the net loss also came down to $2.3 million from the $81.7 million on Q2 and $36.4 million of Q3-2019.
Adjusted EBITDA also reduced to $1.5 million compared to previous quarters $12.3 million while solid liquidity was established with a cash reserve of $155.2 million.
Bottom Line: Should You Buy Tilray Stock Right Now?
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The marijuana market has plenty to offer investors and, if Tilray continues managing its resources well, it might see profitability soon. Additionally, after its recent merger, it seems the stock would continue to remain bullish. However, it might make sense for cannabis stock investors to pause for a couple of weeks as Tilray has run-up in a major way. Investors may want to wait for TLRY to stabilize before taking a position
After Doubling in 2021, Will Tilray Stock Cool Off?
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