Tilray Brands: How Will its Past Performance Affect its Future Potential?
In this Finance ‘In-Action’ we’ll spend some time with Tilray Brands to understand its historical challenges, strategies it implemented to adapt and its positioning for the future.
Tilray gained prominence with Canada's cannabis legalization in October 2018, peaking at a stock price of $214. By 2022, the stock had fallen nearly 60%, as reported by Yahoo Finance. This decline was due to several factors including slower retail store rollouts, thriving black market competition, and rising market oversupply
In 2021-2022 Tilray made acquisitions, launched new products and expanded globally. These growth strategies were overshadowed by double-digit growth in operating expenses: a 46% rise in general & administration expenses, a 31% increase in selling expenses and a 76% increase in marketing & promotion.
In August 2023, Tilray acquired craft beer brands from Anheuser-Busch increasing its beverage alcohol segment's revenue by 4%, while cannabis revenue decreased by 3%. Tilray’s 2023 Annual Report reported a $934 million impairment due to a decline in market capitalization and challenging macroeconomic conditions, leading to a $1.4 billion Net Loss.
The US Drug Enforcement Agency (DEA) moved to reclassify marijuana in April 2024, resulting in a 40% rise in Tilray's stock. Can we expect Tilray’s financial performance to improve in the future based on this announcement by the DEA? How does its decision to diversify revenue protect it from delays in global legalization? Will operating expenses fall ‘in line’ and be proportional to the revenue?
1. Pot Stocks Surge on Report DEA Set to Reclassify Marijuana, Carmen Reinicke, Bloomberg, April 2024. 2. Tilray Brands Inc. Annual Financial Statements, 2023, 3. Why Tilray Stock Fell Almost 60% in 2022, Aditya Raghunath, Yahoo Finance, January 2023, 4. Craft Beer Boom is Saving Tilray From Weed Slowdown, Tiffany Kary, Bloomberg, January 2024. 5. Tilray Brands – 6 Year Stock Price History | TLRY. 6. What Does Impairment Mean in Accounting? With Examples, Alicia Tuovila, Investopedia, June 2024. 7. Fair Value: Its Definition, Formula, and Example, James Chen, Investopedia, February 2024. 8. Carrying Value: Definition, Formula, and Example, Will Kenton, Investopedia, October 28, 2020.
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