Tilray: Will This Marijuana Stock Gain Momentum in 2020?
Tilray (NASDAQ: TLRY), like most of the other marijuana stocks, has been struggling with profound profitability issues – but will this marijuana stock gain momentum in 2020?
Focussed on the medical cannabis market, the company has lost over 50% of its value this year so far. While investors have high hopes for Tilray, we remain skeptical about the long term upside of investing in this marijuana stock. Let’s take a closer look.
Tilray’s Financials Under Pressure
The current COVID-19 pandemic doesn’t bode well for marijuana stocks. Given the cash burn rate of Tilray, investors are concerned about the company’s financial wherewithal to sustain through the duration of the pandemic.
For Q1, the company cash and cash equivalent stands at $174 million – which may seem like a comfortable position, however, Tilray’s history of negative cash from operations leaves us with doubts over its endurance.
Over the past five fiscals, the cannabis stock’s EBITDA losses have been increasing. Investors are concerned that Tilray may not even break even in the next quarter.
Tilray’s revenue growth in Q1 of FY 20 was merely 11% QoQ. It did witness a huge sequential spike in its top-line growth in Q2 last year. However, after that, the pot company’s sales have been range-bound between $45 million to $52 million.
Tilray bets on International Market Growth, Cannabis 2.0 and Legalization in New York
While this may have seemed like a good month for Tilray as the marijuana stock soared over 30% to close at $9.85. Better-than-expected Q1 results coupled with New York Governor Andrew Cuomo’s statement about the legalization of cannabis in NY boosted thsi hemp stock’s value.
Tilray surpassed expectations and logged in a 126% YoY (year-on-year) growth in its total revenue led by the International-Medical segment. The company’s sales of total cannabis kilogram equivalents in Q1 saw a celebrated 92.4% surge over the year.
Tilray attributed this growth to the launch of Cannabis 2.0 products and the rise in adult-use cannabis flower sales. Its net loss for the quarter also narrowed as compared to the same period last year. However, the adjusted EBITDA loss continued to increase.
Tilray’s Long Term Momentum
The pot company’s CEO Brendan Kennedy expects to report positive adjusted EBITDA by the end of 2020. He also emphasized Tilray’s commitment towards realizing cost-savings by the fourth quarter.
Later in May, the cannabis stock announced optimization plans for its adult-use facility in Canada. It is evident that Tilray is making every effort to generate profits. However, it will take some time for the company to turnaround. Investors shouldn’t expect anything positive in the near term as the stock continues to experience volatility.
The picture will be clear after the end of 2020 if the company manages to achieve positive EBITDA and reduce cash burn. Until the Q2 results, we expect the hemp stock to remain volatile.
The company is getting big on international markets. The GMP Certification of its Portuguese subsidiary shows that it is bullish on its EU operations. However, we need to wait and watch how things unfold in a post-COVID-19 world.
Tilray: Will This Marijuana Stock Gain Momentum in 2020?
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