Insights

Why Tilray Shares Shot Higher Today

What happened

Canadian cannabis company Tilray (NASDAQ: TLRY) reported a surprisingly large loss in its fiscal 2022 fourth quarter today, but shares jumped anyway. The stock was trading at the day’s high, 10.3% above Wednesday’s closing price as of 3:30 p.m. ET. 

So what

Tilray’s $458 million net loss included a noncash impairment charge of $359 million, which masked a better quarter than it appeared at first glance. That helps explain why Tilray shares were down in the early morning pre-market, but spiked once investors had a chance to digest the full report. Revenue for the three-month period ended May 31 of $153.3 million increased 14.5% over the prior-year quarter on a constant currency basis, beating analyst expectations by about $2 million. 

Now what

The large impairment charge was “related to changes in market opportunities causing a shift in our strategic priorities,” as well as adjustments for higher borrowing rates and lower currency exchange rates, according to the company. CEO Irwin Simon said it was the result of a plan to focus on “our most profitable core business opportunities in medical, adult-use, wellness, and beverage-alcohol across Canada, Europe, and the U.S.” 

Net revenue for Tilray’s full 2022 fiscal year grew 29% over the prior-year period on a constant currency basis, with 18% growth in core cannabis revenue, a 150% increase in beverage alcohol, and more than 900% growth in Tilray’s wellness business to nearly $60 million. 

Long-term investors are hoping to see federal legalization in the U.S. to drive Tilray’s business. But in the shorter term, today’s stock move shows there is still confidence in the company, as it holds a 20% market share in Germany’s growing medical marijuana market and expects to be free cash flow positive in its operating business units for the 2023 fiscal year. Tilray also ended the quarter with $416 million in cash on its balance sheet. That was enough to push the stock up nicely today.

Howard Smith has positions in Tilray, Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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