Benchmark Out Bullish On 'Well-Positioned' Tilray Ahead of Canada's Cannabis Legalization

Shares of Tilray Inc. TLRY surged Monday in anticipation of Canada’s legalization of recreational marijuana.

The Analyst

Benchmark analyst Mike Hickey initiated coverage of Tilray with a Buy rating and $200 price target.

The Thesis

Benchmark's positive view on the Canadian cannabis company is based on multiple factors, Hickey said in the initiation note. (See his track record here.)

They are:

• Tilray’s early leadership in the industry.
• The upcoming legalization.
• A strategic alliance with Novartis AG NVS and supply agreements with select pharmacies.
• International growth from countries with legal marijuana.
• Meaningful capital infusion.

The vertically integrated company will likely drive significant growth and achieve meaningful share in the Canadian market, in accordance with initial supply agreements and strong early advantages, the analyst said.

“While cannabis is only legal in a handful of countries today, several countries, including the U.S., are in the process of legalizing cannabis for medical and recreational use. We believe the global cannabis market opportunity could exceed $200-billion-plus over the long term, and Tilray is well-positioned to take a meaningful share of this market.”

The alliance with Novartis should allow for greater brand recognition with Canadian physicians, Hickey said. “We believe the company’s supply agreements with major Canadian pharmacies could offer greater awareness and easier patient access to Tilray’s cannabis products.”

Benchmark projects that the legalization of recreational cannabis in Canada on Wednesday will drive "significant near-term growth" for Tilray. The sell-side firm anticipates the Canadian cannabis market could reach the U.S. dollar equivalent of $3.2 billion in 2019 and $8.1 billion by 2023.

Price Action

Tilray shares were down 5.68 percent at $156.24 at the time of publication Tuesday.

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