With its shares down by 25% in the last 12 months, investors seem to be passing on Tilray Brands (NASDAQ: TLRY) stock, and it's easy to see why. Despite years of expansion in its cannabis segment, it hasn't yet proven that it can actually make being a shareholder worthwhile.
That may change soon, due to three new developments that support the bull thesis for the stock. While it's still a risky purchase, if it can move toward efficiency and continue growing at the same time, the risk will be worth taking. For now, let's examine these three new reasons to at least consider investing at some point this year.
1. Profitability may be nigh... finally
One of the aspects of Tilray that other commentators and I have found issue with time and time again over the last few years is its persistent unprofitability.
In its fiscal fourth quarter, which is the most recent quarter, it reported a net loss of $15.4 million, a big improvement from its whopping loss of $119.8 million a year prior. Most of the difference this year is due to the absence of a detrimental fair value adjustment for the company's convertible notes receivable, which was claimed as an operating expense in the same quarter of 2023. The company's general and administrative costs also fell year over year.
More importantly, its operating activities burned just $30.9 million during all of its fiscal 2024, so its $228.3 million in cash and equivalents will be more than enough to sustain it for the remainder of the time it takes to yield actual operating profits. It won't need much more in the way of efficiency improvements to break even -- not to imply that it's under any pressure to do so.
Soon enough, it might finally start to generate more cash than it burns on a regular basis, and that's a substantial reason to consider buying the stock.
2. Another big beer acquisition
On Aug. 13, Tilray announced that it'd be making a purchase of a handful of craft beer brands from Molson Coors Beverage Company for an undisclosed sum. The brands are Hop Valley Brewing Company, Terrapin Beer Co., Revolver Brewing, and Atwater Brewery, and they will grant Tilray new production facilities in Oregon, Georgia, Texas, and Michigan, as well as some distribution resources.
The move is notable because it signals that the company's devotion to its craft beer segment is more than just a fling. In fact, it's anticipating to move around 15 million cases of beer annually thanks to the new purchases. It already claims to be the largest craft beer producer in the Pacific Northwest region of the U.S. Within a few years, it might even become the largest craft beer company in the entire country.
The benefits of such an accomplishment would accrue over the long term, much like the gain from its current craft beer footprint. As its brands gain strength, loyal customers will, at least to an extent, protect its gross margin from the need to spend on marketing or other initiatives to outcompete other players. While that's a game for the long run rather than for any upcoming quarter, the point is that the infrastructure is now in place where it's a possibility.
3. Its presence in Germany is deepening
Tilray has long planned to make competing in the E.U. one of its priorities, especially in key countries like Germany, where it has a chance to influence cannabis legalization policy as it emerges.
On July 29, the company announced that its German subsidiary Aphria RX had finally acquired the trading and cultivation licenses it needs to lawfully grow, process, sell, and distribute medicinal marijuana products. Now, it can start to generate revenue from selling to medical wholesalers, as well as directly to clinics, pharmacies, and hospitals in the country.
The actual effect on the top line will probably not be mind-blowing in the near term, despite Germany's status as one of the larger medicinal marijuana markets in Europe. But, as margins tend to be on the higher side in the medicinal segment owing to the more exacting standards for medicinal products, Tilray's operations in the country could buoy its profits nonetheless, and that's a contributing reason to consider buying the stock.
Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy .
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