Tilray sinks after reporting a larger loss than expected in the second quarter

Associated PressFILE – In this April 15, 2019, file photo, a vendor makes change for a marijuana customer at Rev-Up a cannabis marketplace in Los Angeles. An alliance of large cannabis businesses in the growing global marketplace has a message for the public: We’re good corporate citizens. The 45-member Global Cannabis Partnership that includes Canopy Growth Corp. and other major companies issued guidelines Tuesday, June 18, 2019, aimed at minimising greenhouse gas emissions and promoting ethical conduct and responsible pot use. (AP Photo/Richard Vogel)

  • Tilray, the Canadian cannabis company, reported second-quarter earnings Tuesday that beat analyst expectations on revenue but missed on adjusted loss per share.
  • Shares fell after the earnings release.
  • Tilray’s stock has tumbled nearly 80% from the all-time highs it reached in September 2018.
  • Watch Tilray trade live on Markets Insider.

Shares of Tilray fell as much as 4% after the close ot trading Tuesday when the company reported its second-quarter earnings, which beat expectations for revenue but showed a larger-than-expected loss in the quarter.

Here’s what the company reported versus what analysts surveyed by Bloomberg expected:

  • Adjusted loss per share: -$US0.32 per share reported versus -$US0.26 per share (expected)
  • Revenue: $US45.9 million reported versus $US40.34 million (expected)

“We are pleased with our second quarter results and strong business momentum,” said Brendan Kennedy, Tilray’s CEO, in a press release.“Our team has executed against our plan, with adult-use revenue nearly doubling in the second quarter compared to the first quarter and gross margin increasing sequentially for the second quarter in a row. As we continue to grow, we remain focused on our long-term strategic objectives and deploying capital to maximise stockholder value.”

Revenue for the quarter increased 371% on the year, driven by the acquisition of Manitoba Harvest, legalization of adult-use cannabis in Canada, and growth in international medical markets, the company said. Still, the company reported an adjusted loss of $US31.2 million for the second quarter, nearly triple losses in the same quarter last year. The loss was attributed to increased operating expenses related to growth, the company said.

While it was the first cannabis company to go public in the US, its share price has slipped from a high of more than $US200 last September to where it currently trades around $US45.

In March, shares rose after the company reported first-quarter earnings that exceeded sales expectations but missed on the bottom line.

Analysts are wary of the company partly because it has broadened its focus from Canada to international markets – a move that industry watchers have called risky.

“Tilray is NOT a story of growth in Canada or with production that really matters overall,” wrote Tim Seymour, portfolio manager of the Amplify Seymour Cannabis ETF. “They are lagging the big LPs in Canada” including Canopy Growth, Aphria, Aurora and Organigram.

Other analysts agree. The Canadian adult-use market provides some opportunity for Tilray, wrote W. Andrew Carter of Stifel in a note Tuesday. However, the company “faces a later start to the Canadian second wave and still faces a lack of regulatory clarity from the FDA around CBD,” Carter added.

This could keep the company from launching its US CBD products during 2019, Carter wrote.

In February, Tilray purchased Manitoba Harvest, the world’s largest hemp-food company, for $US318 million. Hemp is largely used because it contains cannabidiol or CBD, which is estimated to become a $US16 billion market in the US by 2025. The company purchased Manitoba Harvest to develop hemp-derived CBD food and wellness products to be released in the US and Canada.

Wall Street is largely neutral on the company – 11 analysts have a hold rating on the stock, two say sell, and five say to buy. The average 12-month price target is $US70.00.

Shares of Tilray are down roughly 35% year-to-date.

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