Cannabis Watch: Tilray expected to grow sales sequentially but remain in the red
Tilray Inc. will likely grow its sales over the previous quarter but it’s expected to post a net loss when it becomes the first major cannabis company to post quarterly results in 2022 on Monday.
Tilray’s results will be followed by updates in coming weeks from other Canadian companies such as Canopy Growth Corp. CGC, -1.43%, Cronos Group CRON, -0.02% and Aurora Cannabis ACB, +0.29% ACB, +0.09% ; as well as U.S. companies such as Curaleaf CURLF, +1.93% CURA, +1.60%, Trulieve Cannabis Corp. TCNNF, +1.39% and Green Thumb Industries GTBIF, -0.74% GTII, -0.58%.
Analysts have been growing more bearish on Tilray’s prospects in recent months amid price pressure and market share losses to smaller rivals.
Since October, analysts have reduced their outlook for Tilray a total of 20 times, compared to 21 unchanged estimates and six instances of increased estimates, according to FactSet.
Despite the dimmer view on profits, Tilray’s sales continue to grow. The company is expected to report $173.7 million in sales for the second quarter, up from $168 million in the first quarter. The first quarter result fell short of Wall Street’s $172.6 million estimate.
Year-ago figures are not comparable for Tilray, given the impact of its acquisition of Aphria, which closed in May 2021.
Alliance Global Partners analyst Aaron Grey said Tuesday that Tilray and other Canadian producers benefitted from a 7.8% growth over the previous month to C$369 million. Industrywide sales increased by 32% over the year-ago figure.
“Pricing pressure in the marketplace continued as every product category with the exception of beverages and oil,” Grey said
Tilray, which continues to be the market share leader in Canada, lost 115 basis points of market share to 10.8%.
Amid analyst moves in recent weeks on Tilray, Bill Kirk of MKM Partners on Dec. 10 cut his fair value price target on Tilray to $10 a share from $16 and reiterated a neutral rating on the company.
All told, the top five Canadian cannabis companies led by Tilray held 43.9% market share in December compared to 46% in November. Top five player OrganiGram Holdings OGI marked the only exception among the bigger players by increasing its market share by 35 basis points to 7.6%.
Canadian companies outside the top five increased their market share by a combined 210 basis points. Among those, Village Farms VFF, -2.01% gained 35 basis points of market share to a total of 6.4%.
Overall, shares of Tilray and other cannabis companies have been weak given the oversupply dynamics in the Canadian market, combined with a reduction in some economic activity due to COVID-19.
The Cannabis ETF THCX, +0.73% is now trading at about $8.19, down from about $12.50 three months ago. The index has been impacted by a lack of action on legalization on the federal front in the U.S., even as several large states such as New York and Illinois continue to scale up their legal cannabis business.
For its part, Tilray shares have sunk to below $7 a share after trading at about $11 three months ago.