Posted by To hear the media still calling Tilray a meme stock is completely wrong. Meme stocks arose in 2020 and are stocks that are over-hyped by retail investors. The hype usually doesn’t correlate with a company’s financial performance. Tilray may have qualified as a meme stock briefly back in early 2021, but the stock has been on a steady decline since then. On 4/9/24 the company released their quarterly earnings report. I read the report and didn’t see anything that looked bad enough to make the stock price drop by 21% in one day. But the financial news said “Tilray Stock Tanks Following Earnings Miss, Outlook Cut“. They want to ignore the fact that the company’s cannabis revenue of $63.4 million was higher year-over-year and the beverage unit sales was up 165% from a year earlier. This is a company that is trying to diversify by expanding into new markets.
Making cannabis legal in the US isn’t going to mean big profits for Tilray. As of today, half of US States have legalized recreational cannabis. There are already thousands of cannabis producers in the US and Tilray is based in Canada. I suspect that Tilray would start buying up these producers, if cannabis was made legal at the federal level. Right now, Tilray’s best avenue of expansion is outside of the United States and Canada. They are doing this by establishing operations in Europe, Australia, and Latin America. This type of expansion costs money and is difficult to do when interest rates are high. Tilray has been managing debt and their assets exceed liabilities. Their debt-to-equity ratio is currently at 12%. Although it varies from industry to industry, a debt-to-equity ratio of around 2 or 2.5 is generally considered good.
The question is, will Tilray ever be able to shed its reputation as a meme stock? The fact that they are in the cannabis and alcohol industry means that a lot of investment firms will automatically avoid the stock. Even if they suddenly found a way to make a profit, without institutional buyers, the stock will have a hard time getting anywhere near its IPO price. In July 2018, it became the first cannabis company to trade publicly on a major U.S. stock exchange, opening on the NASDAQ exchange at a price of $17 per share. By September 2018 the price reached $214 per share. Today the price is hovering around $2 per share. If the price drops below $1 for 30 consecutive days, they will be delisted from the Nasdaq exchange. That is a huge risk for buyers. In addition, many brokerages give you a stern warning when you try to invest in what they call “penny stocks”, stocks trading under $5 per share. With short interest currently at 15.9% of float, it will be unlikely to see Tilray get above $5 in the next 4 or 5 years, unless they get a takeover bid from another company.