Tilray Pre-earnings Analysis

Tilray Pre-earnings Analysis

Chart done on daily timeframe. Tilray has a lot to prove on its earnings this week after the company’s 100% stock rallies in March. Tilray, amongst other cannabis companies, have gain gained significantly over the past month due to the Biden administration’s support of marijuana reform, but that doesn’t change the fact that they’re still posting big losses. Tilray’s annual revenue has gained significantly over the last seven years, but despite the 10x grown in revenue, net income is moving further south. The company lost 1.45B last year on revenue of 627M, a clear red flag about its direction. Their balance sheet is healthy, but their free cash flow is sitting in a negative, placing them in a high risk position of failure if there was an unexpected emergency. 

Tilray’s risk profile fits the same category as other cannabis companies. They mostly ride on the back of political stance on the use of marijuana. As long as there are no clear guidelines for the States as a whole, these companies will struggle to gain the backing of investors. It’s worth watching Tilray closer to the election and after. If Biden is reelected, then cannabis companies may stand a chance to rally in the following 24 months.

For these earnings in specific, the outcome is really a gamble. Tilray is more a of a company to trade, not to invest for now. It moves on trends, not fundamentals. 

Option chain analysis:

Tilray’s options that expire on April 19th currently reflect a 197% implied volatility reading, which translates to about a $.73 move in the underlying stock.