Benzinga | Jan 10, 2022 09:54AM EST

Should Tilray Turn To Exports? Rec Q2 Sales Results Disappointing, Analyst Says

On Monday, Tilray, Inc. (NASDAQ:TLRY) reported an 8% sequential drop in the second quarter net revenue to $155 million. Year-over-year, net revenue increased 20%.

Total cannabis revenue saw a 16% quarter-over-quarter decline to $58.8 million, well below the FactSet consensus estimate of $66.6 million and the projections that Cantor Fitzgerald's Pablo Zuanic disclosed last week.

Tilray also reported a 29% decrease in domestic recreational sales.

Zuanic called this drop "significant," even though the management earlier warned that destocking by the boards/wholesalers would result in reported sales "coming in below underlying retail trends."

In his previous note, the analyst identified a 16% drop in recreational sales in the November quarter in a market that grew 5% over the same period as one of the three "true sentiment drivers," besides stable export trends and cannabis gross margins that "may be down due to operating deleverage and ongoing price deflation."

And while "exports were better than expected," said the analyst, being up 33% on a sequential basis from $10.3 million in the previous quarter, the "rec number and gross margins are both disappointing," considering that gross margin for the cannabis business fell to 23% from 43% in the prior period.

Nevertheless, Zuanic said that the quarter-over-quarter "bump" in exports "should be seen as good news if sustained."

"We stay Neutral and would expect the stock to see some pressure today," Zuanic concluded.

The analyst lowered his 12-month price target to $7.40 from $11.80 while maintaining a Neutral rating on Tilray's stock last week.

In the meantime, the Canadian marijuana giant also announced a new parent name, Tilray Brands, Inc., reflecting the company's evolution from a Canadian LP to a global consumer packaged goods company with a portfolio of cannabis and lifestyle CPG brands.

TLRY Pirce Action

Tilray's shares traded 11.37% higher at $7.15 per share at the time of writing on Monday morning.

Photo: Courtesy of Tima Miroshnichenko from Pexels