During the weekend, another broker-deal slashed its price target on Tilray, Inc. (TSX: TLRY) (Nasdaq: TLRY) to $17 from $20.66. This comes more than a month after the broker-dealer, CIBC, changed its rating on Tilray to Neutral from Buy and we will monitor how the market responds to the development.
CIBC’s rating change on Tilray occurred almost one month after CIBC raised its price target to $25 from $23. Earlier this year, we started to closely follow the Canadian cannabis company after it completed a mega-merger with Aphria. This is a trend that we are closely ahead of the company’s quarterly financial report and our readers should be aware of the opportunity.
Tilray Receives Numerous Rating and Price Target Changes
When CIBC downgraded Tilray to Neutral from Buy, the broker-dealer did not change the price target that was issued to the Canadian cannabis company. During the last quarter, several high-profile broker-dealers reported a change in ratings and price targets on Tilray and we find the trend to be significance.
During this time, Jefferies announce one of the most significant rating changes on Tilray. The broker-dealer announced a double upgrade on the Canadian cannabis company and changed the rating to Buy from Sell. When the change was reported, Jefferies raised its price target on Tilray to $23 from $4.77.
At the time of Jefferies’ change in rating and price target, Tilray was trading above the $14 level. The new price target implied that there was almost 200% upside to Jefferies’ prior rating and the market responded very favorably to this change. The morning after Jefferies issued the upgrade and price target hike, Tilray recoded a double-digit percentage gain which put more attention on the opportunity.
Increased Institutional Buying
Another important trend for Tilray from the second calendar quarter of 2021 is associated with how institutional investors have been purchasing more stock of the company. We consider institutional investor buying to be an important aspect of the cannabis industry and want to highlight two major changes from the second quarter:
- Horizons Marijuana Life Sciences Index is one of the Tilray’s largest shareholders and the fund reported to have purchased an additional 2.31 million common shares in the second calendar quarter, As of June 30th, the ETF owned 4.04 million common shares that were valued at approx. $72.9 million
- AdvisorShares Pure Cannabis ETF reported to have purchased an additional 1.16 million common shares during the second calendar quarter. As of June 30th, the ETF reported to own 1.26 million common shares that were valued at approx. $21.07 million as of June 30th.
Will Aphria Impact Tilray’s Quarter When It Reports Earnings this Week
Later this week, Tilray is expected to report fourth quarter financial results and we expect the market to be highly focused on how the business performed. This will be the first time that Tilray reports quarterly financial results after the completion of the merger with Aphria. Many analysts expect the combined company to show strong revenue growth as COVID-related lockdowns have eased in Canada and Germany.
Tilray has a strong consumer packaged goods presence in the United States, and we expect the merger with Aphria to help the combined company capture market share in the US. Prior to the merger, Aphria strengthened its US infrastructure by acquiring SweetWater Brewing Company, a leading cannabis lifestyle branded craft brewer, and we are bullish the direction the management team is taking the business.
The combined company expects to generate approximately $81 million of annual pre-tax cost synergies within eighteen months and plans to achieve cost synergies in cultivation, production, cannabis and product purchasing, sales and marketing, and corporate expenses. We are favorable on this aspect of the story for Tilray and expect to learn more in the quarterly earnings report.
During the last month, Tilray has fallen more than 25% and has come under pressure with other large-scale Canadian LPs. At current levels, Tilray is valued at slightly more than $6 billion (by market capitalization as of July 26th) and we will continue to closely the opportunity before it reports quarterly financial results.
If you are interested in learning more about how broker-dealers view Tilray (from a rating and price target standpoint), please send an email to email@example.com with the subject “Tilray Price Targets” to be added to our distribution list.
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