Tilray is well-placed to emerge a winner in the cannabis sector long term, analysts say
Canadian cannabis company Tilray Inc. is well-positioned to become a winner in the sector in the long term, Piper Jaffray said Wednesday after the company reported better-than-expected revenue for the second quarter but a widening of losses. The stock was down about 10% in premarket trade, even as analysts weighing in on the earnings struck a mostly bullish tone. Piper analysts led by Michael Lavery highlighted the company's ties in medical cannabis, to Novartis , in the U.S. to Privateer Holdings and in beverages to AB InBev. "We expect Tilray to remain in investment mode to drive growth and do not expect positive earnings in near-term," Lavery wrote in a note to clients. He added that visibility on key strategic growth initiatives justifies the stock's lofty valuation. Cowen analyst Vivien Azer said top line progression "keeps us constructive" on the stock. Tilray delivered $46 million in sales for the quarter, well ahead of Azer's estimate of $38 million, boosted by a doubling of adult-use sales from the previous quarter. "While gross margin was also better than expected, higher levels of SG&A drove a larger than expected adjusted EBITDA loss," the analyst wrote, also predicting continued losses as the company invests to scale its operations. Shares have fall 35% in 2019, while the ETFMG Alternative Harvest ETF has fallen 12% and the S&P 500 has gained 17%.
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