Tilray stock is resurging at present. It’s a needed recovery from a month that saw these shares lose over 25%. Tilray (NASDAQ:TLRY) is one of the largest cannabis producers by market cap, but despite roaring sales, it is struggling to turn a profit.
The company released its Q1 report in mid-May. And thanks to the legalization of adult-use marijuana in Canada, the company’s revenue surged 195% to $23 million y-o-y.
Further important measures to its success included the acquisition of hemp-based food producer Manitoba Harvest, along with the continuous growth of the international medical cannabis market.
The report gave shares a brief respite from a steep decline that is now six months in the making; since the beginning of 2019, Tilray stock has lost over 60%.
For a company as big as Tilray, it is a contrary occurrence as most of its peers have watched their stocks gain in 2019.
On the Q1 results, CEO Brendan Kennedy said the following:
“We are pleased with our first-quarter results and the ongoing, substantial progress our team has made to position Tilray as a global leader in the cannabis industry […] We have made significant progress integrating our recent acquisitions of Manitoba Harvest and Natura Naturals, accelerating our entry into the United States hemp and CBD markets, and increasing our production and manufacturing capacity in North America and Europe.”
Today, shares are up over 8% and, as stated, it is a needed resurgence. However, trading at $38.80, the positives to be taken from the results still haven’t managed to stop Tilray stock from declining overall.
Perhaps this is because the company has shown several red flags. Growth has been slow regarding sales of Canadian medical marijuana, dried flower produces low gross margin, and the company has ballooning operating costs. As such, it returned an adjusted net loss of $25.2 million, which, when compared to the prior-year period loss of $5.2 million, is significant.
Expansion Costs Weigh In
Now, the company is focusing its efforts away from the Canadian market. With far more lucrative returns to be had in both the US and Europe, the company is vying for these markets instead. However, in expanding into these regions, it has spent big, and this will likely offset a massive chunk of profits from all those cannabis sales.
What are your thoughts on this? Was Tilray stock always overvalued?
Featured Image: Canva