The entire cannabis sector is in the red today, but some stocks are down much further than others. Tilray stock (NASDAQ:TLRY) is one such example.
In fact, in a market that has seen the majority of cannabis stocks (especially the bigger players) rise in value in 2019, Tilray has dropped significantly. For perspective, Tilray stock is down 50% from the days in January where it sold for over $100. HEXO (NYSE:HEXO), by contrast, has doubled its value from early 2019.
Considering Tilray is the sixth-largest cannabis company by market cap, it’s a concern for investors to note that these shares must’ve traded on euphoria back in 2018. Its major pullback appears to be ongoing, so is there anything to look forward to here?
The company’s Q1 report is expected this evening. But according to analyst Alan Brochstein at Forbes; “It seems unlikely that the company will report impressive financials for Q1”.
The reason? Amongst others, Tilray didn’t deliver in its Q4 report; it missed analysts expectations by a long-shot. Gross margins declined to just 20.2%, down from 49.9% in Q1, 42.9% in Q2 and 30.5% in Q3. Further, it ended with an inventory of just $16.2 million.
Now, analysts at Sentieo are expecting sales of $20.2 million in Q1. But with a market cap close to $5 billion, the company “is well behind the leaders, Canopy Growth and Aurora Cannabis, and essentially tied with Organigram, which sports a substantially lower market cap of US$1.15 billion”.
It can’t be easy being a Tilray stock investor right now. Brochstein sums it up:
“In 2019, the stock has been a dud, falling 29% to $49.85 despite the overall market as measured by the Global Cannabis Stock Index rising 48%”.
The Bullish Case for Tilray Stock
However, analyst Tim Biggam at Investorplace is more bullish on Tilray stock. Whilst the same sentiment is shared regarding annual performance, he suggests there is potential ahead if you can get your hands on Tilray stock “on any weakness”.
Don’t go in blind here though. Tilray stock is incredibly volatile but Biggam believes a “move back toward the $70 level appears the most likely case”.
He says further:
“Selling a January $70 covered call against the long stock position would bring in an additional $4 in option premium to reduce the overall risk by roughly 8%”.
Currently, Tilray stock is trading for $46.47 USD, down 6.78% on the day. Are you a TLRY investor? What are your thoughts on the upcoming Q1 report?
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