Cantor Lowers Price Target On Tilray's Stock In Anticipation Of Quarterly Earnings

The two Canadian cannabis giants Tilray Inc. TLRY and Aphria Inc. APHA completed their merger in early May after months of negotiations, resulting in the world's largest cannabis company as measured by revenue.

The new combined company kept the Tilray name and continues to trade on Nasdaq Global Select Exchange under the ticker TLRY.

See also: How to Buy Tilray Here (ACB) Stock 

The Analyst: In anticipation of the company's financial report for the quarter ending fiscal 2021, Cantor Fitzgerald's Pablo Zuanic lowered a 12-month price target on Tilray's stock to $22 from $30.25 with an Overweight rating.

The Investment Thesis: "Domestic scale and a credible platform overseas are key ingredients for future LP success, in our view, combined with a track record (for credibility)," Zuanic said.

The resulting company is a combination of one of the best performers in Canada (Aphria) and the company that has been beating its peers in terms of export cannabis markets (Tilray), he added.

"We do not see another LP that can make these combined claims," Zuanic added.

As the new Tilray will follow the old Aphria May fiscal year, Zuanic said that they expect the company will report its quarterly results by July 28.

In addition, Zuanic noted, they anticipate that new Tilray's management will "at least confirm the 24-month timetable" following the closing, for announced $78 million in annual cost synergies.

According to their projections, the new company will post $811 million ($405 million cannabis) in net sales for the 2022 fiscal year and $1.05 billion ($631 million cannabis) for the 2023 fiscal year. In addition, they expect adjusted EBITDA to come in positive at $105 million ($62 million cannabis) for the 2022 fiscal year and $176 million ($137 million cannabis) for fiscal 2023.

"Key questions relative to guidance revolve around the potential to reach 30% rec domestic share," which is currently 17.7%, as well as the "actual net realization of the 2-year CA$100 million cost synergy target," the analyst said. 

Zuanic disclosed that Cantor assumes Tilray will reach 23% rec domestic share by the end of 2023.

Price Action

Tilray's shares were trading 8.89% higher at $20.69 per share at the time of writing.

Photo by Diyahna Lewis on Unsplash