After grappling with various headwinds, including the pandemic and challenges related to legalization, the cannabis industry may be turning a corner. The proven medicinal properties of cannabis, its legalization, active research into genetic development and modification of the plant, and advancements in intellectual property rights have played a role in its resurgence.
Fueled by decriminalization and legal adoption of medical or recreational cannabis in several countries worldwide, the cannabis market is projected to grow at a 15.4% CAGR between 2022 and 2027. The recent optimism surrounding the industry is also evident from the 14.1% returns of the AdvisorShares Pure US Cannabis ETF (MSOS) over the past month.
However, it may not be wise to invest in underperforming marijuana stocks Tilray Brands, Inc. (TLRY) and Canopy Growth Corporation (CGC) as they don’t seem to have enough fundamental strength to capitalize on the industry tailwinds.
Tilray Brands, Inc. (TLRY)
Headquartered in Leamington, Canada, TLRY operates globally as a cannabis-lifestyle and consumer packaged goods company. It operates through four segments Cannabis Business; Distribution Business; Beverage Alcohol Business; and Wellness Business.
For the fiscal 2023 first quarter ended August 31, 2022, TLRY’s net revenue decreased 8.8% year-over-year to $153.11 million. During the same period, the company’s gross profit declined 4.6% year-over-year to $48.61 million. Furthermore, the company’s adjusted net loss and loss per share came in at $44.96 million and $0.08, respectively.
Analysts expect TLRY to report a loss of $0.06 per share for the second quarter of fiscal 2022, ending November 30, 2022, compared to an EPS of $0.07 during the previous-year quarter. The company is expected to keep reporting losses during the current and the next fiscal years.
The stock has slumped 48.4% year-to-date to close the last trading session at $3.81.
TLRY’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
TLRY also has a grade of F for Value, Momentum, and Sentiment and a D for Stability and Quality.
In the F-rated Medical – Pharmaceuticals industry, it is ranked #159 of 163 stocks.
Click here to see the additional POWR Ratings for TLRY.
Canopy Growth Corporation (CGC)
CGC, headquartered in Smith Falls, Canada, produces, distributes, and sells cannabis and hemp-based products for recreational and medical purposes. The company primarily operates in Canada, the United States, and Germany through two segments: Global Cannabis and Other Consumer Products.
For the first quarter of the fiscal year 2023 ended June 30, CGC’s net revenue decreased 19.2% year-over-year to C$110.1 million ($81.64 million), driven partly by a decline in value flower sales in the Canadian recreational cannabis market.
The company’s operating loss widened 879.3% from the previous-year quarter to C$1.84 billion ($1.36 billion) due to a non-cash C$1,725 million ($1.28 billion) due to impairment in goodwill and non-cash fair value changes triggered as a result of the decrease in the company’s market capitalization in the same period.
In addition, CGC’s adjusted EBITDA loss widened 17.5% year-over-year to C$74.80 million ($55.46 million) during the quarter. The net quarterly loss attributable to CGC came in at C$ 2.08 billion ($1.54 billion), compared to a net income of C$392.42 million ($290.94 million).
Analysts expect CGC’s revenue for the fiscal year ending March 2023 to decrease 13.9% year-over-year to $352.11 million. The company’s net loss per share is expected to come in at $0.82 for the current year, compared to an EPS of $0.41 for the previous year.
Shares of CGC have declined 64.6% year-to-date to close the last trading session at $3.29.
CGC’s bleak prospects are reflected in its overall POWR Rating of F, which translates to a Strong Sell in our proprietary rating system. It also has a grade of F for Value, Momentum, and Stability and a D for Growth, Sentiment, and Quality.
CGC is ranked last out of 163 stocks in the same industry.
TLRY shares were trading at $3.80 per share on Monday morning, down $0.01 (-0.26%). Year-to-date, TLRY has declined -45.95%, versus a -19.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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