Why This Brokerage Firm Moved to the Sidelines on Tilray (TLRY) Stock


In late July, cannabis company Tilray (TLRY) went public at $17 per share. Today, about two and a half months after its IPO, Tilray stock crossed above $150. That’s a nine-fold increase, and the reason why Roth Capital analyst Scott Fortune assumed coverage on TLRY with a Neutral rating (previously Buy).

The huge move into marijuana names has been especially good for Tilray stock, which is a global leader in medical cannabis research, cultivation, processing and distribution. TLRY stock has been on fire as Wall Street embraces the cannabis craze.

Fortune commented, “TLRY is currently trading at an extreme valuation multiple to revenue and EBITDA, with shares trading well above our previous price target of $54. There continues to be high and speculative risk elements to the stock. The stock currently has a relatively small float with 17.8M shares outstanding, a significant short interest, limited investors to loan the stock to short sellers, and institutional and retail investor demand for cannabis related equities with currently TLRY one of only three trading on the U.S. exchanges.”

The analyst believes the cannabis industry continues to trade on significant momentum similarly experienced during the dot.com timeframe. Valuations are difficult to apply in a more traditional historical standard.

“Due to the unprecedented volatility we are removing our price target and maintain our Neutral rating. TLRY is currently trading at 39x our CY20 EV/Revenues and 154x CY20 EV/EBITDA, which is a 150% premium to Canadian License Producer industry leader Canopy Growth trading at a consensus 62x CY20 EV/EBITDA. We will continue to monitor TLRY during this time of uncertain volatility,” the analyst added.

Net net, Wall Street believes it’s smart to play it safe when it comes to the medical cannabis maker’s prospects ahead, as TipRanks analytics reveal TLRY as a Hold. Out of 3 analysts polled in the last 3 months, 2 issue neutral rating, while one remains bullish. (See TLRY’s price targets and analyst ratings on TipRanks)

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