Canadian pharmaceutical company Tilray (TLRY) announced this week a partnership with beer and beverage giant Anheuser-Busch InBev to research cannabis beverages. The two companies will be investing $50 million each in the venture, which they hope will help stake their place in a potential $100 billion+ market.
While blogger Jonathan Cooper would have rather seen an acquisition of Tilray by ABI, he says the deal is great for both sides. Tilrway gains access to the “largest beer company in the world and an absolute leader in branding, marketing, and distributing regulated beverages.” Cooper says he does not support an investment in Tilray because of its high valuation but, “this was a great deal for the company and could add significant long-term value for its shareholders.”
Meanwhile, in Daniel Jones’ book, ABI’s win is “obvious.” He says, “for a throwaway amount of money, the firm is dipping its toes into a potentially massive new market that could eventually add many billions (maybe even tens of billions if things go well) of revenue to its books. The size of the investment is so small that if the partnership fails, then management won’t need to answer for it, while if things go well they will look like geniuses.”
CEO of Tilray Brendan Kennedy said, “We are delighted to be joining forces with a world-leading beverage company, AB InBev, to research how to create enjoyable cannabis beverage products. Tilray and AB InBev share a commitment to responsible product development and marketing, and we look forward to beginning our work on this important partnership as Tilray continues to pioneer the development of a professional, transparent, and well-regulated cannabis industry.”
If we step back and look at the bigger picture, we can see that overall TLRY stock has received 2 Buy ratings and 3 Holds. With an average analyst price target of $140, analysts are projecting upside potential of 90% from the current share price. (See TLRY’s price targets and analyst ratings on TipRanks)