Cantor Cuts Tilray Target On Q2 Sales Miss

Although Tilray Inc. TLRY reported its second-quarter sales below expectations, with disappointing recreational.

This was partly due to one-off factors and overshadowed improvements in EBITDA and cash flow, according to Cantor Fitzgerald analyst Pablo Zuanic who maintained a Neutral rating for Tilray, while reducing the price target from $8.00 to $7.90.

The Tilray Thesis: Total sales in the second quarter were adversely impacted by recreational sales, which declined by 16% sequentially, after growing for five consecutive quarters, Zuanic said in the note.

Tilray’s recreational sales of 24.2 million Canadian dollars were particularly disappointing when compared to rival Canopy Growth’s CGC reported 34.9 million Canadian dollars, he added.

Management cited inventory buildup at wholesalers in March and a transition to a broker distributor model as reasons for the miss.

Despite total sales coming in 8% below the consensus estimate, the company’s EBITDA losses were better than expected, with an expansion in EBITDA margins, the analyst said.
He further noted that Tilray expects to reach breakeven EBITDA by the fourth quarter.

Zuanic estimates a sequential improvement in Tilray’s cash burn in the second quarter of around $30 million.

“We think TLRY carries more optionality than investors may be factoring," he wrote.

TLRY Price Action: Shares of Tilray were trading around $7.97 at the time of publishing.

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