Tilray Brands, Inc.

TLRY Details

Tilray Brands, Inc. (NASDAQ: TLRY) is a major global cannabis lifestyle and consumer packaged goods company with operations in Canada, the United States, Europe, Australia, New Zealand, and Latin America and the industry's most extensive global geographic reach. Only Manitoba Harvest CBD products and SweetWater beer are available in the United States. 

Latest News:

• Latest Product Offering: On April 25, 2022, TLRY's subsidiary Breckenridge Distillery, the world's highest distillery and most awarded craft distillery in the US, launched The second edition of the Collectors Art Series, a limited release bottle with local Denver street artist and muralist Alexandrea Pangburn, combining the art of blending whiskey and color. The new Breckenridge XO Cognac Cask Finish Whiskey label will feature Pangburn's flora and fauna-inspired artwork on the Breckenridge Distillery mural behind Number Thirty-Eight in Denver's RiNo Arts District. Starting May 6, the special edition whiskey will be offered in limited quantities only at the Breckenridge Distillery and the Main Street Tasting Room in Breckenridge, Colorado, for USD 125.

Q3FY22 Results:

• Growth in Topline: The company reported a YoY growth of 22.58% in revenues to USD 151.87 million in Q3FY22 (ended February 28, 2022) compared to USD 123.90 million in Q3FY21, driven by YoY growth of 31.94% and 64.10% in Net cannabis revenue and Net beverage alcohol revenue.
• Reported Net Income: However, TLRY reported net income of USD 52.48 million in Q3FY22 vs. net loss of USD 258.64 million in Q3FY21.
• Healthy Balance Sheet: As of February 28, 2022, the company had a cash balance of USD 279.21 million and total outstanding debt of USD 709.96 million.

Key Risk:

• Customer Concentration Risk: A considerable amount of TLRY's revenue comes from a limited number of significant customers. Its revenue could decline if it didn't keep or grow its client relationships or major customers cut back on their purchases.
• Dependence on Third Parties: The TLRY relies on certified and licensed cannabis flowers for production and sale. It may depend on third-party suppliers for high-grade cannabis flowers, placing the company at risk of insecure supply chains and product quality.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

TLRY' stock price has fallen 65.91% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 4.78 to USD 23.04. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 6.10.

Considering the significant correction in the stock price, low leverage, solid margins, current valuation, and associated risks. We recommend a "Speculative Buy" rating on the stock at the closing price of USD 4.98, down 2.54% as of April 29, 2022.

Three-Year Technical Price Chart (April 29, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

Disclaimer

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