Tilray Is a Good Marijuana Stock to Buy on Dips
Source: Tilray Facebook

Tilray Is a Good Marijuana Stock for Investors to Buy on Dips

By

Jan. 22 2021, Published 8:36 a.m. ET

Marijuana stocks were volatile in 2020. While Tilray stock has fallen by more than 15 percent over the last year, it has gained more than 116 percent YTD. The stock has been rising since President Biden won the election. Is Tilray a good marijuana stock to buy in 2021?

Article continues below advertisement

In the U.S., medical marijuana is legal in 35 states, while recreational marijuana is legal in 15 states. In 2021, Alabama, Kansas, South Carolina, and Kentucky could legalize marijuana usage for medical purposes through their legislatures. The marijuana market will likely witness massive growth. The Biden administration is expected to legalize marijuana at the federal level.

Tilray Stock is a buy
Source: Pixabay
Article continues below advertisement

Bearishness in Tilray stock

Tilray stock lost 4.6 percent on Jan. 21 and is down almost 6.1 percent in the pre-market trading session on Jan. 22. There isn't a clear catalyst for this bearishness. Instead, it looks like a pullback from the general excitement surrounding marijuana stocks. Tilray stock has gained over 116 percent YTD.

Tilray will likely benefit from the Aphria merger

In December 2020, Tilray agreed to merge with Aphria. The combined company will likely be the largest global marijuana company. The combined company will operate under the name “Tilray” and trade under the ticker symbol “TLRY” on the Nasdaq Exchange. Aphria's shareholders are expected to own 62 percent of the combined company. The all-stock deal is expected to close in the second quarter of 2021.

Article continues below advertisement

Under the terms of the transaction, Aphria shareholders will get 0.8381 Tilray shares for each Aphria share owned. Tilray shareholders won't see a change to their holdings. The combined company is expected to have an equity value of $3.8 billion.

Tilray’s stock forecast

According to the estimates compiled by CNN, Tilray has a median target price of $10, which is 44.2 percent lower than its closing prices on Jan. 21. The highest target price is $24.20, while the lowest target price is $8.50.

Article continues below advertisement

On Jan. 19, a Stifel analyst raised its target price on Aphria stock to $12.18 and reiterated the hold rating on the stock. The analyst is cautious about the stretched valuation. Cantor Fitzgerald also raised its target price on Aphria stock to 26 Canadian dollars to factor in its merger deal with Tilray.

tilray stock buy on dips
Source: istock
Article continues below advertisement

Tilray on Stocktwits

Tilray stock has become a major talking point on social media platforms. On Stocktwits, GoatInABox wrote that Tilray stock is a buy due to imminent marijuana legalization at the federal level. The company’s merger with Aphria is just a bonus. Another user by the name Stonehard said that Tilray stock could reach $50 in the long run.

Investors should buy Tilray stock on dips

Investors should consider accumulating Tilray stock on dips. Tilray’s merger with Aphria could create several opportunities, specifically global expansion. Currently, Tilray stock trades at a TTM price-to-sales multiple of 11.57x, which looks attractive compared to other marijuana companies. Cronos Group and Canopy Growth are trading as a TTM price-to-sales multiple of 110.43x and 31.88x, respectively. The global legal marijuana market size is expected to reach $73.6 billion in 2027 from $17.7 billion in 2019.

Advertisement

More From Market Realist