May 20, 2020 8:00 am
Canadian cannabis company Tilray Inc. (NASDAQ: TLRY) has turned around in recent weeks. While the stock is down 50% year to date, it’s up 26% for the last month. It’s been a volatile year for marijuana stocks so far.
Tilray closed at $8.16 Tuesday, up 2.51%. The S&P 500 closed down 1.05%. Tilray’s consensus 12-month price target is $17.88.
Sales Get Higher
Tilray saw increased revenues in the first quarter thanks to growth in its medical cannabis, Canadian adult use and hemp lines. The company reported revenues of $52.1 million, up from $23.4 million in the year-ago period.
The coronavirus pandemic hasn’t put a dent in Tilray’s sales thus far. In a call with analysts last week, the company noted that Canada, Germany, Portugal, Australia and multiple U.S. states have deemed legal marijuana “essential businesses,” which allows retail sales to proceed. “This validates our thesis that cannabis is a mainstream product consumed by mainstream patients and consumers,” said CEO Brendan Kennedy.
The chief executive argues that cannabis is a counter-cyclical product. “We believe that this pandemic will demonstrate that legal cannabis behaves more like a consumer staple,” he said. “In other words, things people need, rather than indulgent items such as luxury products.”
If that’s true, the second quarter could be very positive for the cannabis industry. Counter-cyclical goods by definition perform better during market downturns.
Competitor Aurora Cannabis (NYSE: ACB) recently beat earnings expectations by a wide margin. The company’s net revenue for the third fiscal quarter was C$78.4 million. Analysts had been expecting C$66.7 million. Its revenues were also driven by increased sales.
Could the pandemic boost legal pot sales? “One could argue that Canadian consumers are, at the time of COVID …