EN
Tilray Raises Its Guidance for the Year. Is the Stock Finally Headed on the Right Track?
Key Points
Tilray is consolidating its operations in Canada to simplify its business and achieve cost savings.
The company announced new guidance for adjusted EBITDA that is slightly higher at the low end than before.
The business, however, continues to burn through cash.
Tilray Brands (NASDAQ:TLRY) needs to show investors that it's heading in the right direction, because for many years, it hasn't been. The cannabis stock has declined more than 97% in five years, occasionally luring in investors with growth opportunities -- often tied to a U.S. marijuana market that remains off-limits for the Canadian-based producer -- only to inevitably disappoint them later on.
Recently, the company announced a consolidation of its Canadian operations, which would enable it to generate cost savings. Thus, the company has raised its guidance for adjusted earnings for the current fiscal year. It's a welcome sign of progress for the business, but is it enough to make Tilray's stock worth buying? Let's find out.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
Tilray raises guidance for fiscal 2027
Last week, Tilray announced that it would be consolidating operations in Canada, moving cultivation and pre-roll production from its Foss facility (based in Fenwick, Ontario) to other locations in Ontario and Quebec. While it's not a massive move, the company expects to generate annualized cost savings of $10 million. CEO Irwin Simon says these actions are due to Tilray's "commitment to operating with greater efficiency, financial discipline and a clear focus on profitability."
For its current fiscal year, which ends in May, Tilray is now projecting its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be within a range of $70 million to $75 million, up slightly from its previous guidance of $68 million to $75 million.
It's only an improvement on the lower end of its guidance, but it's still a positive sign that Tilray is making efforts to improve its financial position and strengthen its prospects for profitability in the long run.
The move is a positive one for Tilray, but it's not enough to make the stock a buy
An increase in adjusted EBITDA profitability is positive for Tilray, but that's also an adjusted profit figure. It's not a great reflection of how well the business is doing. What's still concerning is that the business continues to burn through cash from its operations, and its growth is choppy.
The Canadian cannabis market isn't all that enticing, as competition is high and margins are low. Meanwhile, loading up on beverage brands has given Tilray's sales a boost, but it hasn't made the business a much stronger investment overall.
Ultimately, this remains a high-risk investment, and investors are likely better off taking a wait-and-see approach. Tilray needs to do a whole lot more than just consolidate operations and raise the bottom end of its guidance to convince the market it's safe to buy the cannabis stock again.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.