Tilray: Cantor Slashes Price Target To $7.40 Ahead Of Earnings

Tilray (TSX: TLRY) is expected to report its second fiscal quarter 2022 results on January 10 before the markets open. The average revenue estimate between 14 analysts is US$172.62 million. This average estimate has steadily been revised lower as the estimate is down from US$211.18 million at the start of July 2021.

Tilray currently has 20 analysts covering the stock with an average 12-month price target of US$10.60, or a 65% upside to the current stock price. Out of the 20 analysts, 1 has a strong buy rating, 2 have buys, 14 have hold ratings and the last 3 analysts have sell ratings on Tilray. The street high sits at US$23 while the lowest 12-month price target comes in at US$0.82.

Cantor Fitzgerald cut their 12-month price target on Tilray from $11.80 to $7.40 while reiterating their neutral rating on the stock. This comes ahead of the companies second fiscal quarter results as they expect the company’s stock to “face pressure from the Nov quarter print,” unless management comes out with bullish commentary during the earnings call.

The biggest drivers Cantor believes will move the stock this quarter are Hyfire data showing Tilray quarter sales dropping 16% sequentially as the market grew 5%, and cannabis gross margins continue to fall. This is primarily due to operating deleverage and continued pricing wars.

For the quarterly results, Cantor expects Tilray to report $164 million and adjusted EBITDA of $10 million, as compared to the street’s estimate of $174 million and $14 million, respectively. The main reason for the difference is due to recent Hyfire data, showing that both Tilray and legacy Aphria products are down 16% this quarter compared to last, with December market share trends not pointing to any improvement. They say that although Tilray remains the company with the largest market share at 10.8%, it has lost 8% year over year.

Lastly, Cantor brings up the issue regarding Aphria Diamond, as Tilray only holds 51% of the company. Aphria Diamond has a capacity of 255 tons and Cantor values Tilray’s portion at $200 million. As of the August quarter, there was a minority interest loss of $41.6 million, but a profit of $14.4 million. This means that “Tilray shareholders do not own the full earnings at Aphria Diamond.” Cantor says that if you deduct the minority interest, Tilray is trading at 12x cannabis sales while Canopy is trading at 12x.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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