The 3 Most Important Takeaways From Tilray’s Quarterly Results

The meteoric surge higher last year in Tilray’s (NASDAQ:TLRY) shares put this Canadian marijuana stock on investors’ radars, but it hasn’t been all good news for shareholders. Its stock price has dropped 75% from its peak of $300 last fall. Can this cannabis company compete with the industry’s largest players for sales in Canada’s new recreational marijuana market? On Monday, management unveiled its latest quarter financials. Based on the surging sales and mounting losses, the roller-coaster ride in Tilray’s shares might not be over anytime soon…

No. 1: Roaring revenue
Canada’s medical marijuana sales have taken off since regulators created a licensing system in 2014, but it’s Canada’s recreational, adult-use market that’s most intriguing to investors. Adult-use sales began last October, and in 2019, recreational marijuana revenue could total in the billions of dollars, far outpacing the 770 million Canadian dollars in medical marijuana revenue Deloitte anticipates this year.

Eager to get its fair share of this emerging market, Tilray secured supply contracts for eight Canadian provinces. As a result, revenue jumped 204% year over year to CA$20.9 million in Q4, up from CA$12.9 million in the third quarter, prior to the start of recreational sales. The fourth-quarter performance brought the company’s full-year 2018 revenue to CA$56.4 million.

In U.S. dollars, Tilray’s full-year revenue was $43.1 million, including $15.5 million in Q4 and $10 million in Q3.

No. 2: Production

Previously, Tilray’s plans were to increase marijuana production capacity to about 76,000 kilos by the end of 2018 and then grow it to 150,000 kilos over time.

Those targets put Tilray among the second-tier Canadian cannabis companies behind Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB), both of which are expected to have over 500,000 kilos of production capacity over the coming years.

Production forecasts, however, aren’t nearly as important as current production growth, because there’s no guarantee any of these marijuana companies will ever reach their stated targets.

Tilray sold 2,053 kilograms equivalents in Q4 2018 up from 694 kilos in the same quarter one year ago. Full-year production more than doubled to 6,478 kilos from 3,024 kilos in 2017. Clearly, the company’s efforts to boost production are paying off, but there’s still a lot of work to do before it can deliver on its peak production forecast…

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