Tilray Inc. (NASDAQ: TLRY) stock is trading near the yearly low on Wednesday after falling over 64% in the year so far and over 75% in the past year. The shares have been grounded since late 2018 as questions arose about the future of the medical cannabis player. Pot stocks have been under pressure during this week due to the continuation of lack of clarity in the marijuana industry.
There has been adversity around the company’s investments as those could yield returns only in the future. Despite Tilray contributing considerably in the beverage and retail partnerships, the opinion in the markets is increasing that these investments are overvalued.
The company’s stock has been impacted by the changes in the cannabis price per gram that is likely to remain as a sign of the future market pricing. The current pricing weakness is likely to continue at least for the next 12 to 18 months. After this, the market could find a balance between supply and demand.
For the second quarter, Tilray reported a wider loss due to higher operating expenses. However, the top line soared over 371% year-over-year backed by the Manitoba Harvest acquisition, the legalization of the Canadian adult-use market, and growth in Europe. Total kilogram equivalents sold tripled to 5,588 kilograms from 1,514 kilograms last year, while average net selling price per gram decreased to $4.61 from $6.38 a year ago.
The company was able to manage its debt properly. As of June 30, 2019, the total debt stood at $434.68 million while total cash remained at $247.76 million. For the trailing twelve months, the return on assets was at a negative of 10.44% and the return on equity was at a negative of 58.20%.
Tilray has been facing weakness in the selling price as the company and the industry has harvested cannabis roughly double the actual sales. Investors remained concerned about how the company will achieve its revenue target of $350 million in 2020 and $588 million in 2021 if the pricing continued to be weak.
However, the company is expected to significantly increase its capacity after its purchase of Natura and greenhouse. The production remained an important aspect of Tilray’s success in Canada. The company’s purchase of Manitoba Harvest turned out to be logical and reasonably priced for traders and Tilray’s valuation metric has improved significantly after Manitoba purchase.
Tilray went from $20 in July 2018 to $200 in September 2018 on pure speculation, and the stock hit $300 on September 19, 2018. Ever since the stock has come crashing down and turned out to be a better low-priced cannabis stock by the investors. The Tilray stock is on the verge of going down but a hugely positive catalyst, as expected by the market, could turn the ship around.