Here’s Why Tilray (TLRY) Stock Jumped 13% in After-Hours Trading

Shares of Tilray (TLRY) rallied in after-hours trading Tuesday, rising nearly 13%. Driving the medical cannabis maker’s stock was the news that the company has set up a partnership to research non-alcohol beverages containing tetrahydrocannabinol (THC) and cannabidiol (CBD). The partnership is limited to Canada and decisions regarding the commercialization of the beverages will be made in the future.

Cannabidiol-infused beverages could become a $600 million market in the US in the next four years, according to a note from Canaccord Genuity. Revenue from cannabis beverages could outpace the general demand for cannabis products by over two times, capturing 20% of the market for cannabidiol edibles by 2022, according to the analysts. Canaccord estimates CBD beverages will become a $260 million market by 2022, and THC-infused beverages a $340 million market.

The research partnership combines AB InBev’s deep experience in beverages with Tilray’s expertise in cannabis products. AB InBev’s participation will be through its subsidiary Labatt Breweries of Canada, one of the country’s founding businesses and its leading brewery, and Tilray’s participation will be through its Canadian adult-use cannabis subsidiary High Park Company, which develops, sells, and distributes a portfolio of socially responsible cannabis brands and products in Canada. Each company intends to invest up to $50 million USD, for a total of up to $100 million USD.

“Labatt is committed to staying ahead of emerging consumer trends. As consumers in Canada explore THC and CBD-infused products, our innovative drive is matched only by our commitment to the highest standards of product quality and responsible marketing. We intend to develop a deeper understanding of non-alcohol beverages containing THC and CBD that will guide future decisions about potential commercial opportunities,” said Kyle Norrington, President, Labatt Breweries of Canada. “We look forward to learning more about these beverages and this category in the months ahead.”

“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,” said Brendan Kennedy, CEO of Tilray.

TipRanks suggests caution has a slight grip on Wall Street analysts surveying TLRY stock. Out of 5 analysts polled in the last 12 months, 2 bet on the stock, while 3 hedge their bet. The 12-month average price target stands at $140, marking nearly 97% in upside potential from today’s closing price. (See TLRY’s price targets and analyst ratings on TipRanks)

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