Tilray Inc: Soon-to-Be $1-Billion-Revenue Pot Stock Could Easily Triple

TLRY Stock Is a Mid-Cap Pot Stock That Deserves a Look

Marijuana stocks took a beating in 2021 and, so far in 2022, investor sentiment remains cautious.

Since its legalization in Canada in October 2018, the demand for legal cannabis has been slow to rise in the country, especially with the COVID-19 pandemic partially shutting down the economy. The demand for legal pot in Canada has also been impacted by the availability of cheaper black-market pot.

Marijuana stocks continue to trade with neutral sentiment, lacking any strong and sustainable upside moves. This is reflected in the ETFMG Alternative Harvest ETF (NYSEARCA:MJ), a broad barometer of the pot sector. The exchange-traded fund (ETF) recently declined to a low of $8.47.

ETFMG Alternative Harvest ETF’s breakdown was significant in that it fell below its March 2020 low of $8.81.

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In my view, the selling hasn’t been justified. I expect the ETF to rally, but there could be another retest of its low. Look for the near-term trading to remain volatile, with $10.00 resistance representing the immediate target.

I view the price weakness in marijuana stocks as a contrarian investment opportunity. One pot stock to keep an eye on is Tilray Inc (NASDAQ:TLRY).

Chart courtesy of StockCharts.com

Why Tilray Stock Could Triple

Shares of Tilray Inc traded at a whopping $300.00 on September 19, 2018, a month prior to the legalization of marijuana in Canada. Unfortunately for TLRY stock investors, the subsequent years have proven to be extremely difficult, with the price of Tilray stock now just around $5.00.

The reality is that the initial surge in TLRY stock was excessive and euphoric, with nothing to do with Tilray Inc’s fundamentals. The buying was speculative, so here we are with Tilray stock down by about 98%.

But for investors who are willing to accept the volatility in the pot sector, TLRY stock could turn out to be a long-term winner. With a current market cap of $2.5 billion, I view Tilray Inc as ideal: not too small and not too big.

Tilray generated $513.0 million in revenues in fiscal 2021, and we’re already beginning to see the company ramp that up. Its revenues over 12 months to November 2021 were $589.0 million.

This is expected to surge to $992.7 million in fiscal 2022 and to $1.2 billion in fiscal 2023. This gives Tilray Inc an attractive forward multiple of 2.1 times its consensus 2023 revenue estimate. (Source: “Tilray Brands Inc. (TLRY),” Yahoo! Finance, last accessed March 15, 2022.)

The one-year Tilray stock chart is quite bearish, with TLRY stock caught in a nasty downward channel and desperately scouring for buying support around $5.00.

Chart courtesy of StockCharts.com

Shares of Tilray Inc are currently in a death cross formation, which is a bearish technical crossover pattern that arises when the 50-day moving average breaks below the 200-day moving average.

This occurred around $14.00 in September 2021, and Tilray stock has since fallen by roughly 62%. The selling was accompanied by weak relative strength, which prevented TLRY stock from mounting any sustainable rally. There were several unsuccessful attempts at breaking channel resistance. 

Analyst Take

At this point, shares of Tilray Inc need to find some buying support, which appears to be at $5.00.

Tilray stock needs an improvement in market sentiment and a move back to the risk on trade. When this materializes, the stock could easily take a run toward $8.00–$10.00, followed by $15.00–$20.00.

The ride for TLRY stock investors will not be easy, but the opportunity to achieve strong share-price appreciation will make the journey more manageable.

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