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Why Did Tilray Rise More than 17% Yesterday?

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On Tuesday, Tilray (TLRY) rose to a high of $30.97 before closing the day at $30.10, which represents a rise of 17.3% from the previous day’s closing price.

Cowen cuts its target price for Tilray

On Tuesday, Cowen and Company cut its target price from $150 to $60. The company maintained its “buy” rating on Tilray. Although Cowen lowered its target price by $90, the new price still represented a return potential of 99.3% from Tilray’s closing price of $30.10. Cowen analyst Vivien Azer thinks that the recent decline in Tilray’s stock price created a buying opportunity, as reported by Bloomberg.

According to Bloomberg, Azer is bullish on Tilray’s initiatives in addressing capacity constraints, its position to enter the US CBD market, and growing international opportunities. Cowen’s optimistic outlook appears to have led to a rise in the company’s stock price on Tuesday.

Other analysts’ recommendations

Tilray reported its second-quarter earnings on August 13. The company outperformed analysts’ revenue estimate. However, Tilray’s adjusted loss per share was higher than analysts’ expectations. Following the company’s second-quarter earnings, Benchmark lowered its target price from $120 to $80.

Overall, analysts have a 12-month target price of $54.20, which represents a potential upside of 80.1%. Among the 16 analysts that follow Tilray, 31.3% recommend a “buy,” 62.5% recommend a “hold,” and 6.3% recommend a “sell.”

Expansion in Canada

Tilray has invested $32.6 million in three of its five production facilities in Canada to increase its production. The company also reached a long-term wholesale supply agreement with third-party suppliers. With regulations on innovative cannabis products like vapes, edibles, beverages, and oral strips expected to be cleared later this year, the company is developing a portfolio of brands.

The US market

In February, Tilray acquired Manitoba Harvest, which produces and markets a wide range of hemp-based consumer products. In July, the company acquired Smith & Sinclair, which makes edible candy, cocktails, and fragrances. Also, Tilray introduced a portfolio of hemp-extracted products in the second quarter. All of these initiatives could drive Tilray’s revenues in the US.

BDS Analytics and Arcview Market Research expect the US hemp-based CBD market to exceed $20 billion by 2024. So, many of the major cannabis players are entering the US market to gain market share.

In March, Canopy Growth (WEED) (CGC) acquired AgriNextUSA, a hemp enterprise. The company is also researching hemp and hemp derivatives at its Batavia facility in Illinois. On August 19, Aurora Cannabis (ACB) completed its acquisition of Hempco Food and Fiber.

Tilray’s YTD stock performance

Tilray has underperformed the broader equity market and its peers. The company has lost 57.3% of its stock value YTD (year-to-date) as of Tuesday. During the same period, Canopy Growth and Aurora Cannabis have returned -9.2% and 11.7%, respectively. The ETFMG Alternative Harvest ETF has fallen 1.2% YTD, while the Horizons Marijuana Life Sciences Index ETF has risen 2.0%.

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