Once-promising Canadian cannabis cultivator Tilray (NASDAQ:TLRY) stock has lost its mojo in a big way. The company has swung from a profit to an earnings loss, according to Tilray’s most recently issued earnings report.
Not only that, but a prominent analyst issued a $3 price target on TLRY stock as the company acknowledged losing market share in its home country.
If there’s any company that’s the poster child of the cannabis trade gone wrong, it’s Tilray. Do you remember how much hype surrounded this company in late 2018? There was a whole lot of buzz, but in 2022, it looks like Tilray’s investors aren’t getting the happy ending they hoped for.
It’s a shame, as a whole lot of wealth has been lost in that trade. Yet, even after the steep share-price losses, there are reasons to believe that Tilray’s loyal investors won’t see a sustainable turnaround anytime soon.
What’s Happening with TLRY Stock?
We don’t even have to revisit late 2018 to appreciate the persistent downtrend in TLRY stock. Just in 2022 so far, the shares have lost half of their value. Recently, they barely held above the $3 level.
Does a low share price equate to a good value? Not always, and unfortunately, Tilray is a prime example of a business moving in the wrong direction.
Sure, the buyers can point to Tilray’s 8% year-over-year net revenue increase in fiscal 2022’s fourth quarter. That’s not a huge growth rate, though, and it doesn’t offset Tilray’s discouraging bottom-line trajectory. Specifically, Tilray swung from net income of $33.6 million in the year-earlier quarter, to a deep net loss of $457.8 million in Q4 FY2022.
Tilray Stock Could Break Below $3 and Stay There
The company cited “changes in market opportunities causing a shift in our strategic priorities, and market conditions inclusive of higher rates of borrowing and lower foreign exchange rates.” These are duly noted, but such a profound, negative year-over-year earnings change is unsettling.
On top of that, Tilray can’t seem to maintain its market share in Canada, the company’s home country.
In particular, Tilray’s Canadian retail market share declined from 12.8% in the second quarter of fiscal 2022, to 10.2% in the third quarter and then 8.3% in Q4. That’s an awfully steep drop over just half a year.
Perhaps it’s justified, then, that Benchmark analyst Mike Hickey downgraded TLRY stock to a “sell” rating. Hickey also issued a $3 price target on the shares. Is this price target too harsh, though?
Given Tilray’s problems, $3 might actually be optimistic. With a cautious tone, Hickey duly noted Tilray’s “continued deterioration from its core Canadian cannabis business.”
He also observed that the company is “losing market share in pre-rolls and vapes.” This, evidently, was a product category that Tilray had highlighted as a strength in the previous quarter.
What You Can Do Now
If you invested in Tilray during the peak hype phase, you’re in a tough position. Surely, it’s distressing to witness the company shifting from a net profit to a loss and losing home-country market share.
It might not be a bad idea to cut one’s losses and accept the reality that TLRY stock could go significantly lower than $3. And if you’re not already in the trade, feel free to stand aside as Tilray fights an uphill battle to regain a profitable profile.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.