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Tilray Q2 earnings preview: What are the factors at play?

Tilray (NASDAQ: TLRY) may no longer be a darling among marijuana investors as it used to be, but the recent stock stabilization gives enough reason to keep track on it. After hitting a peak shortly following its IPO last year, Tilray investors were set for a shock as the stock tumbled 80% since. However, it has stabilized from April, trading mostly between $40 and $50.

Though Tilray has put in a considerable amount of investments into beverage and retail partnerships, there is rising criticism that even these initiatives are overvalued in the markets. It’s hard to be sure though, given we are at the early stages of the cannabis industry.

Tilray first quarter 2019 financial summary snapshot

When Tilray reports second-quarter earnings on August 13, Tuesday, after the closing bell, we will hopefully get a few insights on these partnerships, as well as Tilray’s future course. Analysts expect Q2 revenues of $41.1 million, up 320%.

No peg on OpEx

Meanwhile, the Toronto-based firm is forecast to report a loss of 25 cents per share as rising operating expenses continue to weigh on its bottom-line.

CEO Brendan Kennedy had earlier stated that they plan to concentrate on opportunities in Europe and the US to overcome the weakness in Canada. If that is the case, it would call for additional short-term expenses into expanding the team and operations in these regions.

cannabis stocks performance comparison

Since cross-border CBD transportation continues to be illegal in the US and there is no clear indication on when this would be removed, Tilray will need to pump money into US production as well if it hopes to remain in the fray.

A mixed platter

As Tilray trailed behind its rivals in the medical marijuana segment, it shifted its focus to the abundant opportunities in the CBD-infused food products industry. The acquisition of Manitoba Harvest and more recently, UK-based alcohol gummy maker Smith & Sinclair, were aimed at producing food products based on cannabinoid.

However, the Federal Drug Administration recently questioned the authenticity and safety aspects of such products, besides initiating the first hearing on it two weeks ago.

READ: Canopy Growth earnings preview: Q1 crucial in the recent turn of events

As food products account for over a quarter of Tilray’s total revenues, a lot about this stock’s progress would depend on the outcome of these hearings as well.  

Earnings history

In the first quarter, Tilray reported a wider loss due to higher operating costs and expenses. The bottom line came in line with the analysts’ expectations while the top line exceeded consensus estimates.

In the trailing four quarters, Tilray has surpassed bottom-line estimates twice.

READ: Cronos’ Q2 results beat market estimates

Tilray stock has an average Hold rating in the market. It has a 12-month average price target of $71.67, which is at a 68% upside from Thursday’s (Aug 8) trading price.

Rival Aurora Cannabis (NYSE: ACB) will report earnings results on August 20, while Canopy Growth (NYSE: CGC) will report on August 14.  

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

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