Tilray (TLRY) Partnerships Could Be Setting the Company Up for Success, But the Stock Might Suffer


Tilray (TLRY) might be the little pot company that could.

You could say the Beatles got it right — all you need is a little help from your friends. Over the course of two days, the Canadian cannabis business announced two very big partnerships with two very big names in the pharmaceutical and beverage world. As of Dec. 18,  it is known that TLRY will collaborate with Sandoz AG, a division of Swedish biopharma Novartis and as of Dec. 19, that AB InBev (Budweiser) help TLRY morph its cannabis into non-alcoholic drinks and medical products for mass distribution.

However, Roth Capital analyst Scott Fortune reminds us that the current market has been experiencing short-term weakness, with many cannabis companies experiencing a selling pressure that has trickled-down from an eagerness buyers experienced leading up to the day Canada legalized recreational marijuana in mid-October. In Fortune’s opinion, due to tax selling pressures into the end of the year (whether for tax losses or profits), Tilray continues to be a volatile stock with a limited number of shares.

“The partnership opens both companies to a new burgeoning market of infused cannabis drinks to serve both the large cannabis market and the potential new mass market CBD beverage industry. We believe the consumer is slowly substituting cannabis for alcohol,” Fortune suggests.

“We believe the partnership is valuable for Tilray in establishing global distribution with a well-recognized pharmaceutical company to further extend Tilray’s reputable, high-quality, medical cannabis. Sandoz AG already has a large sales force with many doctor relationships in place throughout the world and affords Tilray from investing in capital intensive sales and distribution infrastructure to serve the market,” the analyst added.

Since the Sandoz’ global agreement is reaching beyond Canada, Fortune says he has reason to believe the partnership between Tilray and AB InBev will extend globally as well, allowing the two companies to work together to distribute cannabinoid (CBD) beverages to more countries as they slowly begin to legalize cannabis in the future.

All in all, despite the enthusiasm for the company’s distribution plans, Fortune reiterates a Neutral rating for the stock, but bullishly says cannabis is the way of the future.

When it comes to Tilray, analysts don’t necessarily see eye-to-eye about the future of this stock. Out of five, two are bullish and three are sidelined. With a price target of $140, the potential upside is just about 87%. (See TLRY’s price targets and analyst ratings on TipRanks)