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Tilray Downgraded by Two Analysts on Valuation Concern

Tilray was downgraded by two analysts. But the cannabis company has quadrupled over three months amid optimism about the prospects for legalization.
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Tilray  (TLRY) - Get Tilray Brands Inc. Report shares fell Thursday after two analysts cut their ratings on the diversified Canadian marijuana company on valuation concern, even after a stronger-than-expected earnings report.

The stock recently traded at $30.13, down 4.4%. But it has quadrupled (up 318%) over the past three months amid optimism that a Democratic-Party-led Congress will join with President Joe Biden's administration to legalize cannabis at the federal level.

As for the analysts, Piper Sandler slashed its rating to neutral from overweight, but raised its price target to $26 from $15 to reflect recent market movement.

The stock is trading at 11 times its 2022 sales outlook, leaving little room for further gains, Piper Sandler analysts said, according to Bloomberg. 

It may take another year or two before marijuana is legalized at the federal level, they said. And it’s unclear when Tilray will participate in U.S. recreational markets.

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To be sure, they’re optimistic about Tilray’s proposed merger with Aphria  (APHA) - Get Aphria Inc Report and they see improved profitability coming.

Meanwhile, Benchmark cut its rating to hold from buy and more than doubled its price target to $32 from $12. 

Benchmark analysts, too, see an excessive valuation, though they also say the Aphria merger “should enable a step up in profit,” Bloomberg reports.

Tilray reported a net loss of $3 million, or 2 cents a share, compared with the year-earlier loss of $219.8 million, or $2.14 a share. Revenue rose 21% year-over-year to $56.6 million. 

Analysts polled by FactSet expected a loss of 14 cents a share on sales of $56 million.