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Tilray: Target Price and Valuation Multiple

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As of Thursday, Tilray (TLRY) was trading at $35.12—a fall of 23.7% since its second-quarter earnings on Tuesday. During the second quarter, the company beat analysts’ revenue expectations. However, Tilray’s net losses were higher than expected. To learn more, read Tilray Stock Fell More than 10% after Its Q2 Earnings.

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Tilray’s YTD stock performance

Currently, Tilray is trading 27% higher than its 52-week low of $27.65. The stock is trading at a discount of 88.3% from its 52-week high of $300. Year-to-date, the company has lost 50.2% of its stock value. Tilray has underperformed the broader equity market. During the same period, the S&P 500 Index has increased 13.6%. The ETFMG Alternative Harvest ETF (MJ) has returned 3.1%.

Lower valuation multiple

The decline in Tilray’s stock price since its second-quarter earnings brought its valuation multiple down. As of Thursday, the company was trading at a forward EV-to-sales multiple of 9.95x—compared to 12.83x before the announcement of its second-quarter earnings. The company has been trading way below its average valuation multiple of 24.87x for the last seven months. However, Tilray continues to trade at a premium compared to a median valuation multiple of 4.83x for nine Canadian cannabis companies. During the same period, Aurora Cannabis (ACB), Aphria (APHA), and Canopy Growth (WEED) were trading at forward EV-to-sales multiples of 11.18x, 2.0x, and 8.51x, respectively.

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Analysts’ recommendations for Tilray

After Tilray reported its second-quarter earnings, Benchmark lowered its target price from $120 to $80. The wider net lost might have led Benchmark to lower its target price. In the above graph, you can see that Tilray’s average target price has been declining. The lower target price indicates weakening sentiments. Currently, analysts have a 12-month target price of $76.40. As of Thursday, the company was trading at a discount of 117.5% from analysts’ 12-month target price.

Overall, analysts favor a “hold” rating for Tilray. Among the 16 analysts that cover Tilray, 62.5% recommended a “hold,” 31.3% recommended a “buy,” and 6.3% recommended a “sell.”

Peer comparison

This year, Aurora Cannabis, Aphria, and Canopy Growth have returned 14.3%, 0.3%, and -0.5%, respectively. On August 6, Aurora Cannabis provided better-than-expected guidance for the fourth quarter. On Thursday, the company announced an increase in its secured credit facility.

Aphria outperformed the top-line and bottom-line expectations in the fourth quarter. To learn more, read Aphria: Target Price and Valuation Update.

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