UPDATE: Tilray (TLRY) PT Lowered to $4.15 at Cantor Fitzgerald

Cantor Fitzgerald analyst Pablo Zuanic lowered the price target on Tilray (NASDAQ: TLRY) to $4.15 (from $5.75) while maintaining a Neutral rating.

The analyst comments "We stay Neutral and lower our 12-month price target to $4.15 from $5.75 on reduced estimates and sectoral derating. We think there was a lot to like in the Tilray ("TLRY") qtr (print/call out 7/28 am), such as FY23 EBITDA guidance of $70-80Mn (vs. $48Mn in FY22) and expectations to be FCF positive in FY23; the company overachieving on synergies (past and on guidance); the win-win structure of the agreement with HEXO; innovation driving rec market share recovery in Canada; >50% adjusted cannabis gross margins in the May qtr (53% vs. 33% in Feb); affirmation of the company’s #1 position in Germany (company claims 20% € share) and likely lobbying prowess there (yes, together with ACB and Demecan, we would add), to highlight some of several positives. However, we think that the company’s growing “complexity” (a good trait in a fine wine, but not in a stock) may start to weigh on the stock. In our view, those wanting direct US exposure have better options (MSOs); ditto for those wanting a US branded/ecosystem (CGC and the STZ platform); for pure international (read non-NA) exposure, see CLVR; for Canadian rec leadership (Organigram, anyone?). We also think that ACB offers as good an alternative in terms of international exposure, with a better valuation (1x CY23E sales vs. 4x) and a stronger balance sheet (net cash vs. 0.7x broadly defined net debt to sales as May end for TLRY). We also think that TLRY would benefit from better disclosure (to start, how about EBITDA by divisions?); more consistency (if you adjust sales or EBITDA by FX, how about adjusting for the sizeable Aphria Diamond minority interest?); and clarity (what of the HEXO deal cash windfall really constitutes EBITDA? how much of the vaunted cost synergies flow to the bottom line?). We remain Neutral, despite our growing appreciation and understanding of the company’s international presence and potential there."

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