Canadian cannabis company Tilray (TLRY) - Get Tilray, Inc. Report, one of the most popular stocks of its kind on Reddit, has finally showed some signs of life and caught investors’ attention. Shares traded 14% higher on October 19, despite it still being down a whopping 42% for the year. The most probable reason for bullishness is the hiring of former Bacardi executive Blair MacNeil as the company's president.
TLRY has been free-falling since the early February peaks due, in part, to lack of regulatory catalysts in the cannabis space. However, Wall Street Memes sees a few good reasons to buy the stock at depressed levels.
(Read more from Wall Street Memes: SPCE Stock: Experts Forecast 55% Upside Ahead)
#1. Reaching for global leadership
Tilray has made key acquisitions since December of last year. The biggest corporate deal was the merger with Aphria.
Since the two combined, Tilray turned into a market leader in Canada and accelerated its long-term plan of becoming the world’s leading cannabis-focused consumer company. The Tilray-Aphria merger was justified by (1) market positioning in North America, (2) a foothold in Europe, and (3) lower production costs and synergies.
A few months ago, Tilray purchased cannabis company MedMen Enterprises, which has 24 retail locations in six U.S. states. The investment was also aligned with the company’s goal of being a key global player in the cannabis space. CEO Irwin D. Simon has said:
“The investment we are announcing in MedMen securities, one of the most recognized brands in the $80 billion U.S. cannabis market, is a critical step towards delivering on our objective as we work to enable Tilray to lead the U.S. market when legalization allows.”
#2. $91 billion market opportunity
Third-party data suggests that the legal cannabis market will reach a whopping $91 billion by 2028, implying an impressive CAGR of 26%. As medical cannabis has recently become legal in many parts of the world, further legalization can be the key catalyst boosting product demand. The expected growth in the sector is also attributed to awareness about the health benefits of cannabis.
Additional data suggests that the global cannabis pharmaceutical market was set to grow from $67 million in 2019 by a CAGR of 76% through 2027. Should Tilray position itself as a key player in this rapidly growing industry, investors stand to reap the benefits over the next several years.
#3. Good vibes from Wall Street
Current share price of $11.50, at last check, is still far from sell-side consensus of $14.73. Despite an average neutral rating among analysts, Wall Street still sees 27% upside potential over the next twelve months.
Jefferies’ analyst Owen Bennett is much more optimistic, and sees gain potential of 90% at his price target of $22. He expects Tilray to strike sizable deals in the US sometime soon. The analyst also thinks that Tilray should buy cannabis assets to achieve the company’s ambitious sales target.
A bit less bullish is Bank of America’s analyst Heather Balsky. Still, she believes in 48% upside at a price target of $15. According to the analyst, the acquisition of MedMen positions the company well in the US and provides distribution opportunities in Canada and Europe.
Even the skeptical ones, including Piper Sandler analyst Michael Lavery, has a price target of $14. At those levels, TLRY would be worth 38% more than it is now. The analyst’s caution is based on increased competition from low-price providers.
The legal cannabis market could grow substantially in the next few years at a CAGR of 26%. How bullish are you that Tilray will be a global leader in this fast-growing industry?
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)