Tilray Vs. Aurora: Cannabis Stock Wars Heat Up

Weed stocks have been trading higher in the last couple of days with AdvisorShares Pure Cannabis ETF (ARCA: YOLO) is up 11.94%, AdvisorShares Trust AdvisorShares Pure US Cannabis ETF (ARCA: MSOS) jumping 11.99%, and ETFMG U.S. Alternative Harvest ETF (ARCA: MJUS) also gaining 9.63%. 

Why have cannabis stocks been trading higher for the past five days? 

The increase could have been sparked by the news that GOP lawmakers introduced their own cannabis legalization bill, which has led many to think that this could a step closer to federal reform. Or maybe they are up because earnings report season is underway with financial reports from various marijuana giants.

In any case, we decided to take a look at two favorite weed stocks on the major exchanges in the United States.

About Aurora:

Aurora Cannabis (NASDAQ: ACB) operates medical cannabis, consumer cannabis and hemp-derived CBD sectors. Being one of the largest cannabis companies in the world, it has a global footprint spanning 25 countries across five continents. Its market cap is at $1.32 billion. 

The current production capacity is around 150,000 kilograms of marijuana biomass annually.  

In the recent period, the company has been focusing on the medical cannabis market in Europe.

About Tilray:

Tilray (NASDAQ: TLRY) was the first pure-play marijuana company to list on NASDAQ back in 2018, reaching an eightfold within just two months of going public. It was founded in 2013, and some three years later it became the first medical cannabis producer in the U.S. to obtain a good manufacturing practices certification.

In May of this year, Tilray acquired another large cannabis operator – Aphria, giving it a market cap of $5.73 billion. At the time of the merger, the combined company was projected to generate roughly $81 million in annual pre-tax cost synergies within the following eighteen months.

Tilray has operations in Canada, the U.S., Europe, Australia and Latin America; its 20 brands are available across 20 countries including cannabis lines, hemp-based foods, and alcoholic beverages. The company is collaborating with Anheuser-Busch InBev (ABI.BR), the world's largest brewer.

U.S. Market:

In 2020, Aurora bought Reliva, LLC, one of the biggest producers of hemp-derived CBD products in the U.S. for around $50 million in stock, favorably positioning itself in the U.S. for possible federal legalization.

When Tilray merged with Aphria it obtained its cannabis lifestyle branded craft brewer SweetWater, in addition to already acquiring a producer of hemp-based foods, Manitoba Harvest, in 2019. Then, in August 2021, the company acquired the majority of the Los Angeles-based cannabis retailer MedMen’s (OTCQX: MMNFF) outstanding senior secured convertible notes. Under the deal, Tilray would take a 21% ownership interest in case of federal marijuana legalization.

Industry Size: 

In its 2020 Investor Presentation, Aurora cannabis highlighted how it is earning its leadership position in a $200 billion industry, while in its newest presentation from October 2021, the company does not share industry size projections on a global level. Nevertheless, it discusses several markets separately, estimating its global biosynthesis market size would reach $10 billion by 2025 and its European market size hit CA$5 billion by 2025.

Tilray’s chairman and CEO Irwin D. Simon recently stated that the company aims to “realize the promise and potential of Tilray by capitalizing on the nearly $200 billion global cannabis market opportunity.”

What’s Next:

Aurora announced a business transformation plan in Sep. 2020, when it appointed Miguel Martin as new CEO. Under the new plan, the company “exited markets and infrastructure that didn’t make sense from a financial standpoint,” and is now started to concentrate on key markets that drive the highest revenue improvement.

The company’s core operation is still medical cannabis. It is investing in genetic mapping and working on the launch of new products including premium products like vape pre-rolls and concentrates. Currently, it’s not looking to consolidate with another large cannabis business.

As part of its focus on Europe, Aurora recently invested in Netherlands-based Growery B.V., one of the few license holders entitled to participate in the Controlled Cannabis Supply Chain experiment.

Tilray, meanwhile, confirmed it is working on maximizing near-term profitability through its operations across both medical markets and in Canada, enhanced by the further development of SweetWater and Manitoba Harvest in the U.S.

It has also set its eye on the U.S. maximizing its opportunity there for when legalization happens. Tilray further plans to enter other new medical and adult-use markets and increase its distribution of value-added branded products globally across both markets. More merger and acquisition deals could be expected to expand its global outreach. The company also values the potential of the European cannabis market.

Financials:

Aurora reported total net revenue of $60.22 million for the first quarter of fiscal 2022. Revenue dropped 11% year-over-year for the fiscal year. Out of the total net revenue, medical cannabis accounted for $41 million, while consumer cannabis made for $19 million. While adjusted EBITDA was a loss of $12 million, it dropped 79% year-over-year from a loss of $58 million.

During the quarter, Aurora sold 23% fewer kilograms than in the first quarter of fiscal 2021. The company executed over $33 million in annualized cost-saving and remains on track to reach anticipated $60 to $80 million.

In Tilray's latest financial report for the first fiscal quarter ended August 31, 2021, the company disclosed net revenue of $168 million, up by 43% from $117 million in the same period of fiscal 2021. The increase was driven by a 38% growth in net cannabis revenue to $70 million, net beverage alcohol revenue of $15 million following the SweetWater acquisition on November 25, 2020, and wellness revenue of $15 million from Manitoba Harvest.

Adjusted EBITDA came in positive, reaching $12.7 million, which is 58% higher than in the same quarter of fiscal 2021; this marks the tenth consecutive quarter of positive adjusted EBITDA. Net loss for the period amounted to $34.6 million, which compares to a net loss of $21.7 million in the prior-year quarter.

Stock Performance: 

Year-to-date, Aurora’s shares lost 21.43%, while over the last month they gained 6.70%. Shares of Aurora opened at $9.70 per share on the New York Stock Exchange on Oct. 23, 2018, which means they are currently trading below their IPO level. Its shares saw amazing spikes in 2018 and 2019. Before listing on NYSE, Aurora was already a public company, trading on the Toronto Stock Exchange.

Tilray’s shares gained 37.56% year-to-date, while over the last six months the stock dropped 17.69%. In 2018, Tilray was one of the hottest IPOs with shares going from $17 to $214. Currently, they are also trading below their IPO level, currently going for $12.38 per share.

Photo: Courtesy of Elsa Olofsson on Unsplash