Tilray Q2 preview: Where next for TLRY stock?

When will Tilray release Q2 earnings?

Tilray will publish second quarter earnings covering the three months to the end of November 2021 before US markets open on Monday January 10.

Tilray Q2 earnings preview: what to expect from the results

Wall Street is currently expecting Tilray to report the following numbers in the second quarter. Year-ago comparisons have not been provided due to the change in Tilray’s financial year following the merger with Aphria last year, which means the second quarter’s timeframe does not align with the results posted last year. However, the results from the previous quarter have been supplied for context.

• Revenue of $172.6 million (vs $168 million in Q1)
• Adjusted Ebitda of $14.0 million (vs $12.7 million in Q1)
• A net loss of $36.2 million (vs a $34.6 million loss in Q1)

Cannabis revenue, which accounts for over 40% of total income, is expected to drive topline growth in the quarter as sales should benefit from the reopening of legalised marijuana retail stores in Canada since mid-June when Covid restrictions started to ease. However, this will be closely-watched considering competition is intensifying and the battle is being fought using prices.

Meanwhile, revenue from alcohol sales by its SweetWater brand and wellness, CBD and hemp product sales through Manitoba Harvest, as well as income from distribution activities, are all expected to remain broadly in-line with what was delivered in the previous quarter. Therefore, cannabis sales are likely to be the deciding factor as to whether Tilray can beat topline expectations this time around, having narrowly missed them during the last two quarters.

Tilray is expected to deliver its 11^th consecutive quarter of positive adjusted Ebitda, although its net loss at the bottom-line is expected to widen slightly from the previous quarter. Notably, Tilray purchased Breckenridge Distillery in the US last month and said this would provide an immediate boost to Ebitda going forward. The business is known for its bourbon whiskey and portfolio of craft spirits and is being folded into SweetWater.

Tilray completed its merger with Aphria in May 2021 and the enlarged company has already locked-in $55 million of annual run-rate cost savings so far. Investors will be keen to know what progress has been made as Aphria continues to be integrated into Tilray. Once synergies are realised, the company has said this should rise to around $80 million going forward. The merger has improved scale and helped Tilray stay in the black at the adjusted Ebitda level over the last year – in fact, the company said adjusted Ebitda would have been as high as $17 million in the first quarter if normalised for Aphria’s production costs, showing the potential boost it could provide going forward.

The merger has also cemented Tilray as the leading cannabis company in Canada and helped solidify itself as one of the market leaders overseas. For example, it is already the largest player in the medicinal market in the key European market of Germany. Tilray is also among the companies best positioned to capitalise should marijuana be legalised at the federal level in the US – which is the number one trigger that the global market is eagerly awaiting to be pulled. It has convertible notes in US player MedMen which will convert into shares should the US give the green light.

Where next for TLRY stock?

Tilray shares have been trending lower over the last six months and currently trade at their lowest level in 13 months. If the current trend persists, we could see the stock continue to slide toward $6. Levels suggest there is sizeable downside potential, first to the $4.50 that provided support back in September 2020.

On the upside, the first target is the 50-day sma at $9.72 and then the 100-day sma at $10.88, which is in-line with the tentative 6-month trendline that started in June. The RSI is currently bearish but has recently slipped into oversold territory, and volumes have trended higher over the first week of 2022.

(Source: Eikon)

The 20 brokers that cover Tilray have an average target price of $11.44 – implying there is over 70% potential upside from the current share price following the heavy selloff over the last seven months.

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