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Monday, November 23, 2020

How Does Tilray Inc (NASDAQ:TLRY) Measure Up?

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One stock that is on everyone’s radar today is Tilray Inc (NASDAQ:TLRY). The company made history yesterday by being the first full-fledged US cannabis IPO to appear on the big boards. Shares have been in a frenzied rally since the action kicked off yesterday when the stock checked down to nearly $20/share in the first hour of action. Now, a day later, we are almost 50% higher and the action shows no signs of letting up.

To size this thing up, assuming rev growth accelerates to 65% this year and 75% next year, the IPO priced at 46x 2018 sales and 26x FY19 sales. Marijuana will be legal in Canada for recreational purposes starting October 17, so it is fair to assume that will result in a nice acceleration in top-line growth in Q4 and next year for the British Columbia-based company. If we assume top line growth accelerates to 75% this year and 200% next year, sales multiples would fall to 44x and 15x, respectively. But, momentum right now suggests folks aren’t too concerned with valuation.

Tilray Inc (NASDAQ:TLRY) started trading yesterday after pricing a 9 mln share IPO at $17/share. The IPO priced at 76x 2017 sales, or about 50x 2018 sales (if you extrapolate Q1 sales growth out for this year).

According to the company’s IPO announcement, “Tilray, Inc., a vertically-integrated and federally-licensed cannabis cultivator, processor and distributor, today announced the pricing of its initial public offering of 9,000,000 shares of Class 2 common stock. 6,524,000 shares of Class 2 common stock will be offered in the United States and certain other countries except Canada at a price to the public of US$17.00 per share for a total offering size of US$110,908,000 and 2,476,000 shares of Class 2 common stock, which we refer to as Subordinate Voting Shares, will be offered in Canada and certain other countries except the United States at a price to the public of CAD$22.451 per share for a total offering size of CAD$55,586,200. Based on current exchange rate1, the total combined offering size is approximately US$153,000,000.00.”

Clearly, the market has high hopes for some big top-line acceleration that is priced into these valuations. At this point, the TLRY is accelerating up the charts as sentiment and speculative fervor fuel the action.

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The chart shows a massive rip higher over since this stock started trading. Volume is excellent and the momentum is following through on top of yesterday’s movement.

According to yesterday’s release, “Tilray has granted the U.S. underwriters a 30-day over-allotment option to purchase up to 978,600 additional shares of Class 2 common stock and the Canadian underwriters a 30-day over-allotment option to purchase up to 371,400 additional Subordinate Voting Shares at the initial public offering price, less underwriting discounts. Closing of the offering is expected to occur on July 23, 2018, subject to the fulfillment of customary closing conditions.”

At this time, carrying a price per share in the market of $29.75, TLRY reported a Q1 net loss of $5.2 million on sales of $7.8 million, compared with losses of $679,000 and revenue of $5 million in the year-earlier period. Overall in 2017, TLRY banked sales of $20.5 million and a net loss of $7.8 million. We will update the story again soon as developments transpire. Sign-up for continuing coverage on shares of $TLRY stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $TLRY, either long or short, and we have not been compensated for this article.

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