Our Tilray Stock Prediction In 2019 (Buy or Sell?)

Time for a snap quiz. Without using Google or peeking, identify the public figure who made this statement:

Federal and state laws (should) be changed to no longer make it a crime to possess marijuana for private use.

Cue the theme from Jeopardy. Give up?

It was President Richard M. Nixon. Old “Tricky Dick” may have been a conservative Republican, but he occupied the White House from 1969 to 1974, a freewheeling era in American history. Prevailing cultural trends sometimes prompted him to embrace unlikely causes.

Fast-forward by roughly half a century, and today marijuana has transitioned from hippie rebellion to Wall Street darling. It’s still outlawed at the federal level in the U.S., but increasing numbers of states are legalizing pot for medicinal as well as recreational use.

Among all the industries I’m asked about by investors, “canna-business” consistently receives the most inquiries by far. I’ve frequently written about pot stocks; some I recommend, others I warn you to avoid.

Which brings me to a marijuana stock in the news: Tilray (NSDQ: TLRY), a Canada-based maker of marijuana medical products. Tilray’s stock price has wildly gyrated according to event catalysts. Is the stock a good buy in 2019 or a latter-day example of “Tulipmania”? Let’s find out.

What Is Tilray?

With a market cap of $6.5 billion, Tilray makes a variety of drug treatments for medical uses. These products are based on tetrahydrocannabinol (THC) and cannabinoid (CBD) compounds, which are extracted from marijuana.

Tilray makes THC-dominant, CBD-dominant and THC/CBD balanced treatments. The THC and CBD potencies are directly reflected in the company’s products, which can be administered or consumed via several methods. Tilray also sells accessories, such as vaping tools.

Tilray is headquartered in Nanaimo, British Columbia, with operations in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, South Africa, and the U.S.

How Has Tilray Stock Performed?

Tilray stock has been volatile, taking investors on a roller coaster ride.

Since going public on July 19, 2018, Tilray’s stock has gained a whopping 221.1% compared to a decline of 9% for the S&P 500.

However, over the past three months, Tilray shares have declined 48.6% compared to a decline of 11.6% for the S&P 500.

Who Are Tilray Rivals?

Canopy Growth (NYSE: CGC, TSX: WEED)

Based in Smith Falls, Canada, Canopy Growth grows and sells medical cannabis in Canada and around the world. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.

With a market cap of $9.7 billion, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names.

Aurora Cannabis (NYSE: ACB)

Based in Edmonton, Canada, Aurora Cannabis produces and distributes a wide variety of medical marijuana products.

The company’s products consist of dried cannabis and cannabis oil; CanniMed vegan capsules; and hemp products. With a market cap of $5.2 billion, Aurora Cannabis also operates CanvasRX, a network of cannabis counseling and outreach centers.

GW Pharmaceuticals (NSDQ: GWPH)

GW Pharmaceuticals discovers, develops, and markets cannabinoid prescription medicines. With a market valuation of $3.5 billion, GW Pharmaceuticals’ primary product is Sativex, an oromucosal spray for the treatment of multiple sclerosis, cancer pain and neuropathic pain.

U.K.-based GW Pharmaceuticals has a global distribution reach, with several new drugs in the developmental pipeline.

marijuana cash

Will Tilray Go Up In 2019 (Should You Buy)?

Founded in 2013, Tilray has many firsts under its belt:

  • In December 2016, Tilray became the first medical cannabis producer in North America to be Good Manufacturing Practices (GMP) certified.
  • In July 2018, the company became the first cannabis company to launch an initial public offering (IPO) on the NASDAQ.
  • In September 2018, Tilray became the first Canadian cannabis company to legally export medical cannabis to the U.S. for a clinical trial. TLRY shares soared on the news.

In December 2018, the company signed a global partnership with Novartis (NYSE: NVS) subsidiary Sandoz generic pharmaceuticals to sell, distribute and co-brand Tilray’s non-smokable/non-combustible medical cannabis products in legal markets worldwide. Tilray stock spiked on this news as well.

The Novartis partnership is a significant competitive advantage, allowing Tilray to piggy-back an entrenched sales, marketing and health-care delivery network.

This video explains the ramifications of the Tilray/Novartis deal:

Two additional catalysts have benefited Tilray and its peers in recent months:

  • Passage of the 2018 Farm Bill, signed into law on December 20, 2018 by President Trump. The bill essentially decriminalizes hemp-based CBD.
  • On October 17, 2018, Canada legalized possession and use of recreational cannabis for all adults. Medical marijuana has been legal in Canada since 2001.

The potential profits of legalized marijuana are enormous. According to data compiled by research firm Statista, annual sales of medical and recreational marijuana will exceed $24 billion in 2025 (see chart).

Tilray is devoting much of the money raised through its successful IPO to expand production capacity and develop new products. At the same time, with the help of Novartis subsidiary Sandoz, Tilray is penetrating new markets overseas.

Sandoz is co-branding Tilray’s products for prescription by licensed health care providers, which should give Tilray a substantial leg-up over rivals. The assistance of Novartis’ deep pockets should also help reduce Tilray’s research and development costs.

In additional moves that set the table for long-term growth, Tilray has signed agreements with Shoppers Drug Mart and Pharmasave, two large pharmacy chains in Canada, to distribute its cannabis products.

Tilray is engaged in several ambitious research projects that should soon result in new marijuana-based treatments, notably:

marijuana payouts
  • Post-traumatic stress disorder study with the University of British Columbia;
  • Glioblastoma study with Grupo Espanol de Investigacion en Neurocologia;
  • Chronic Obstructive Pulmonary Disease study in partnership with McGill University;
  • Chemotherapy-induced nausea and vomiting study in Australia in cooperation with the University of Sydney and government of New South Wales;
  • Essential tremor study with the University of California San Diego, which facilitated the first legal export of a cannabis product from a Canadian company to the U.S., where cannabis is still illegal at the federal level.

Will Tilray Go Down In 2019 (Should You Sell)?

Now the bear case. As with many marijuana companies, Tilray is long on hope and short on quarterly performance. The company has racked up a consistent record of net income losses.

During the first nine months of 2018, Tilray lost $36.7 million. There are other promising pot companies that aren’t losing money; Tilray faces daunting competition from a rising number of better-capitalized competitors. Investors may have to wait a long time for the firm to turn itself around.

Tilray is far from the surest bet on medical marijuana. TLRY has been bid to perhaps unsustainable heights by the hype about the cannabis industry’s prospects. The bubble for many pot stocks, including Tilray, could soon burst.

Overall Tilray Forecast And Prediction For 2019

Despite a struggling bottom line, Tilray has enjoyed rapid top-line growth. Losses are narrowing and sales are jumping.

In the most recent quarter, Tilray generated year-over-year revenue growth of 85.8%. The average analyst expectation is for Tilray to rack up year-over-year earnings growth in 2019 of 45.6%.

Tilray’s partnership with blue-chip Big Pharma player Novartis, as well as its supply distribution deals with widespread pharmacy chains, bode well for future growth.

I remain moderately optimistic on Tilray. However, due to the company’s record of earnings losses, I advise caution. This stock is best-suited for aggressive investors with an appetite for risk.

John Persinos is the managing editor of Investing Daily.

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