is tilray a buy or sell
Source: Tilray Facebook

Is Tilray a Buy or Sell Amid Marijuana Uncertainty in 2021?

Mohit Oberoi, CFA - Author

Jan. 5 2021, Updated 9:01 a.m. ET

Tilray stock was volatile in 2020. While the stock has fallen more than 40 percent over the last year, it has gained almost 50 percent since the 2020 U.S. presidential election. Four U.S. states voted to legalize recreational marijuana. Now, marijuana investors are looking ahead to the Georgia Senate runoff, which is scheduled for Jan. 5. Is Tilray stock a buy or a sell ahead of the Georgia Senate runoff?

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In December 2020, Tilray and Aphria announced a merger that would create the world’s largest marijuana company. Both of the stocks gained after the news. The merger is expected to be complete in the second quarter of 2021, although it's subject to regulatory approvals. The combined entity would trade under Tilray’s ticker symbol “TLRY,” while Aphria stockholders would own 62 percent of the combined entity.

tilray marijuana stocks
Source: Pexels
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Tilray stock Georgia elections

The Georgia Senate runoff will have an impact on U.S. stock markets in general and the marijuana sector in particular. If Democrats win Georgia, they would get the majority in the Senate, which would ease the way for President-elect Joe Biden’s proposed tax hikes. A Democrat-controlled Senate isn't the best-case scenario for markets. The feared tax hikes might become a reality.

However, it's the other way around for marijuana companies. The U.S. House of Representatives passed the MORE (Marijuana Opportunity Reinvestment and Expungement) Act, which decriminalized marijuana at the federal level. The Act has little chance of getting through the Republican-controlled Senate. However, if Democrats take over the Senate, the Act might get passed and marijuana would be decriminalized at the federal level.

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Tilray stock on Stocktwits

Most Stocktwits users are bullish on Tilray stock. Username Briceman took a swipe at Tilray bears who would have lost heavily amid the recent rally in its stock. Another user by the name of Nosh expects Tilray stock to rise to $10 before facing resistance at $11.82.

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Tilray's stock forecast

According to the estimates compiled by TipRanks, Tilray has an average target price of $9.75, which is 8.3 percent higher than its closing prices on Jan. 4. The highest target price is $15, while the lowest target price is $4.77.

Tilray's valuation

Tilray stock trades at an NTM EV-to-revenue multiple of 5.97x. Since the company isn't posting a net income right now like most other cannabis companies, it doesn't have a PE multiple.

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Tilray doesn't pay a dividend

Tilray doesn't pay a dividend like all of the other marijuana companies. Since the sector is in the high growth phase and companies are burning cash and posting losses, investors shouldn't expect a dividend in the short to medium term. However, some ancillary marijuana companies pay dividends.

tilray stock price history
Source: TIKR

Tilray stock looks like a buy

In 2021, marijuana stocks could bounce if Democrats get the majority in the Senate. Talking of Tilray, the merger with Aphria creates a lot of opportunities, especially global expansion. The combined entity would also have better synergies and economies of scale. Tilray stock looks like a good buy at these prices. The stock looks like a good investment in the marijuana space.


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