Cannabis stocks have been catching the eye of investors and analysts alike, especially following a bold 2018 for the marijuana industry. Canada made marijuana legal for recreation in October and since then all sorts of innovation has sprung up in the field — whether it be the actualization of cannabis companies that had not been legitimate before or companies that are using components of the plant for medicinal purposes, like Tilray (TLRY).
Tilray, a leader in the medical cannabis industry is getting the attention of Piper Jaffray analyst Michael Lavery. With enthusiasm about the possibilities of cannabis down the road, the analyst initiates coverage of the stock, rating it Overweight. (To watch Lavery’s track record, click here).
“We expect strong industry growth long-term, and we believe Tilray is well positioned to be one of several likely winners, especially given its relationships in medical (Novartis), in the US (Privateer Holdings), and in beverages (AB InBev). We consider its IPO lock-up expiry to be a near-term risk, especially with 77% insider ownership, but our 12-month Overweight view is based on its fundamental outlook. It is unclear if Tilray might be interested in a minority investor, but it is likely attractive to several potential outside companies.”
Furthermore, Lavery sees the company as “having the ingredients” for long-term growth, suggesting its relationships with multiple different companies in different sectors is a pro. Tilray has partnerships with Novartis on the medical front, Privateer on the equity front as well as ABI for beverages.
“Market opportunity is $15-50B near-term, potentially $250-500B. We estimate a $250-500B potential long-term global market, with a near-term market of $15-50B. We expect recreational use to source from illicit trade and alcohol, medical use to source from other medical treatments (e.g. pain relief, sleep aid, opioids), and non-psychoactive CBD-infused cannabis products to source users from food, beverage, and personal care categories. Assuming further global legalization momentum continues in key markets, we estimate Tilray could be positioned for $3-10B in medium-term sales (2018E: $68M),” the analyst estimates.
Tilray is an investment some analysts are recommending, but it’s not so across the board. TipRanks analytics show out of the six analysts keeping an eye on Tilray stock, half are bullish and half are sidelined. The consensus price target of $127.50 shows a potential upside of just about 25%. (See TLRY’s price targets and analyst ratings on TipRanks)