Tilray, Canopy, and Aurora Cannabis Are on the Rise — Do They Make Good Buys?

Cannabis has proved significant scope in the biopharmaceutical industry, and companies are actively investing in the development of a strong cannabis portfolio. Apart from its extensive use in the medicinal industry, it sees high demand in the recreational sector as a psychoactive drug. The U.S. medicinal and recreational cannabis sales are expected to reach $52.60 billion by 2026.

The Canadian cannabis market is one of the fastest advancing, more than doubling in value between 2019 and 2020.

However, the industry continues to struggle with legalization barriers globally, which is limiting its near-term growth. Marijuana remains illegal under federal and many state laws, with police making some 546,000 arrests for cannabis-related crimes in 2019, mostly for simple possession. Moreover, recreational use of marijuana is still taxed and regulated in states where it's legalized.

Cannabis stocks Tilray Brands, Inc. (TLRY), Canopy Growth Corporation (CGC), and Aurora Cannabis Inc. (ACB) have been on the rise lately. However, we think this is not the right time to invest in them.

Tilray Brands, Inc. (TLRY)

Headquartered in Leamington, Canada, TLRY engages in the research, cultivation, production, marketing, and distribution of medical cannabis products in Canada and internationally. It operates through four segments Cannabis Business; Distribution Business; Beverage Alcohol Business; and Wellness Business. 

For the fiscal fourth quarter ended May 31, TLRY’s gross profit stood at negative $6.73 million, down 70.1% year-over-year. Operating loss for the period increased 534.3% from the prior-year quarter to $467.42 million. Net loss per share increased 136.8% from the same period the prior year to $0.90.

The consensus revenue estimate of $158.56 million for the fiscal first quarter ended August 2022 indicates a 5.6% year-over-year decline. Analysts expect its EPS to come in at a negative $0.07 in the same quarter.

The stock gained 12.3% over the past month. However, it has declined 70.2% over the past year to close the last trading session at $3.84.

TLRY’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

TLRY has a Value, Momentum, and Sentiment grade of F and a Stability and Quality grade of D. In the F-rated 173-stock Medical - Pharmaceuticals industry, it is ranked #172. Click here to see the additional POWR Ratings for TLRY (Growth).

Canopy Growth Corporation (CGC)

Headquartered in Smiths Falls, Canada, CGC engages in producing, distributing, and selling cannabis and hemp-based products for recreational and medical purposes. It operates through segments, Global Cannabis; and Other Consumer Products. 

On July 18, CGC announced the closing of the previously announced exchange transaction of its 4.25% unsecured notes due 2023 to reduce its debt obligations by approximately $263 million.

For the fiscal quarter ended June 30, CGC’s revenue decreased 20.9% year-over-year to C$122.86 million ($95.45 million). The gross margin came in at a negative C$1.39 million ($1.08 million). The company’s operating loss came in at C$1.84 billion ($1.43 billion), up 879.3% from the prior-year period.

Street revenue estimate of $90.63 million for the fiscal quarter ending September 2022 reflects a 14.1% year-over-year decrease. Also, its revenue estimate of $383.31 million indicates a decline of 16.2% year-over-year in the ongoing fiscal year.

The stock slumped 83.5% over the past year to close the last trading session at $2.87. It gained 14.8% over the past month.

It’s no surprise that CGC has an overall F rating, which translates to Strong Sell in our POWR Ratings system.

CGC has an F grade for Momentum, Stability, and Sentiment and a D for Value and Growth. In the Medical - Pharmaceuticals industry, CGC is ranked last. To see the additional POWR Ratings for Quality for CGC, click here.

Aurora Cannabis Inc. (ACB)

Headquartered in Edmonton, Canada, ACB produces, distributes, and sells cannabis and cannabis derivative products in Canada and internationally. 

For the fiscal third quarter ended March 31, 2022, ACB’s total net revenue decreased 8.6% year-over-year to $50.43 million. Cash balance declined 7.6% from the prior-year quarter to a negative $480.55 million, while adjusted EBITDA stood at negative $12.26 million.

Analysts expect ACB’s EPS to come in at a negative $0.10 for the quarter ending September 2022, indicating a decline of 99.8% year-over-year. The consensus revenue estimate of $40.81 million represents a decline of 15.5% year-over-year in the same quarter.

ACB’s shares have declined 77.5% over the past year to close the last trading session at $1.50. It gained 7.9% over the past month.

ACB’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system.

ACB has a Momentum and Sentiment grade of F and a Stability and Quality grade of D. It is ranked #161 in the same industry. Click here for the additional POWR Ratings for Growth and Value for ACB.

TLRY shares were trading at $4.05 per share on Wednesday afternoon, up $0.21 (+5.47%). Year-to-date, TLRY has declined -42.39%, versus a -11.16% rise in the benchmark S&P 500 index during the same period.

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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