Benchmark Downgrades Tilray (TLRY) to Sell

Benchmark analyst Mike Hickey downgraded Tilray (NASDAQ: TLRY) from Hold to Sell with a price target of $3.00.

The analyst comments "TLRY delivered F4Q22 financial results that exceeded consensus view on both revenue and profit but missed Benchmark estimates. TLRY initiated a FY23 profit profile that exceeded consensus view, but we are cautious that newly announced profit growth primarily reflects newly announced revenue and cost synergies and are potentially masking continued deterioration from its core Canadian cannabis business. In the quarter, TLRY retail market share declined to 8.3% and from 10.2% in F3Q22 and 12.8% in F2Q22. We are not convinced “corporate cannabis” can create compelling products or brands in Canada. We estimate TLRY is also losing market share in pre-rolls and vapes, a category it was highlighting strength in the prior quarter. We think the cannabis market in Canada will continue to struggle from over-supply and pricing compression; we are not optimistic on international cannabis growth, and we don’t see a federal legalization path for TLRY in the U.S. in the near term, leaving limited operational options and hollowing the implied strategic value of any U.S. cannabis acquisitions. We are not convinced that TLRY can grow premium cannabis at scale in Canada and expect that its resource allocation to premium cannabis cultivation will either fail outright and/or oversupply the market causing pricing pressure in the connoisseur flower segment. Further, we expect the potential of a mix shift toward promotional flower as the weight of inflation on consumer’s budgets gradually shows through. Canadian LPs and retail continued to grow in quarter. An estimated 46% of the cannabis market is channeled through illegal markets, a systemic issue that could be hard to remedy. We do not anticipate any Canadian cannabis regulatory relief."

For an analyst ratings summary and ratings history on Tilray click here. For more ratings news on Tilray click here.

Shares of Tilray closed at $3.65 yesterday.

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