Whatever Happened to Tilray (NASDAQ:TLRY)?
The Motley Fool
Published May 13, 2019 08:24
Updated May 13, 2019 08:36
Tilray Inc (NASDAQ:TLRY) was one of the stars of last year’s marijuana madness. During the rally kicked off by Canopy Growth Corp’s (TSX:WEED)(NYSE:CGC) $5 billion acquisition, Tilray actually briefly eclipsed Canopy itself, going on a 750% rally that sent its market cap to unprecedented levels. At the time, there was a lot of hype surrounding the company, a recent IPO that had the blessing of some high-profile Silicon Valley venture capitalists.
Since then, the shine has come off this once venerable marijuana stock. Down 29% year-to-date, it has not only failed to rise, but actually tanked during the early 2019 marijuana stock rally. While the marijuana sector is full of boom and bust stories, Tilray’s has been more pronounced than most. To understand why that is, we need to look at the reasons investors have turned away from this once popular stock.
A series of high-profile earnings misses In the last few quarters, Tilray has repeatedly failed to hit analysts’ earnings estimates. In Q4, it missed by $0.17 per share; in Q2 and Q3 it missed by $0.08. The company will be releasing its Q1 quarterly report tomorrow, so we’ll have to see whether it can buck this trend. So far, though, Tilray’s failure to meet expectations has not inspired investor confidence.
Mounting net losses That Tilray is missing on earnings is a concern in itself — and what’s even more concerning is that it’s not only under-performing, but actually losing money. In its most recent quarter, the company lost $67 million on revenues of $43 million, meaning its loss as a percentage of revenue was extremely high. While it’s normal for companies to lose money when they’re still not a year out from their IPO, one of the main reasons for Tilray’s huge loss is a little concerning to say the least.
Stock-based compensation: almost half of revenue! In Q4, Tilray reported share-based compensation of $21 million, up from $0.1 million in the same quarter a year before. The fact that this is a 21000% year-over-year increase is alarming in itself. More concerning, though, is the fact that this is almost half of the company’s revenue for the period.
It’s normal for early stage growth companies to pay executives and employees in stock, but this level of compensation on just $43 million in revenue raises questions about the company’s dedication to its shareholders–particularly given that the growth in this expense area absolutely dwarfs the company’s year-over-year revenue growth.
Get The App
Foolish takeaway Right now, Tilray is still too young and unproven a company to make long-term predictions. The fact that it has fallen out of the limelight is in itself reason to doubt that it will go on another mega-rally anytime soon.
If you’re looking for a marijuana stock to invest in, Canopy Growth is probably a better bet than Tilray. With a stronger growth rate, slimming operating losses and growing net profits , it has a lot going for it. Canopy also has much better and more enduring name recognition than Tilray, which ensures publicity that could drive future gains.
Fool contributor Andrew Button has no position in any of the stocks mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.