Why is Tilray Stock so Cheap?

High time this global cannabis company approached free cash flow.

Andrew Willis 11 November, 2022 | 4:18AM
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Andrew Willis: You’d think that a move at the federal level in the U.S. to pardon marijuana possession offences would help bring cannabis shares a lot closer to their fair value estimates, but even after Biden’s bump to the prices of pot stocks, companies like Tilray (TLRY) are trading at a bargain.

While the market waits for the next steps toward U.S. federal legalization, it might be missing the continued growth potential at the international level. In its reverse merger with Tilray, legacy Aphria brought an extensive international distribution network, which should power roughly 15% average annual growth through 2030 in the global medicinal market, excluding the U.S. and Canada.

We still believe the U.S. offers the fastest growth potential of any market worldwide, and that’s where Tilray’s interest in MedMen pays off. Once legalization arrives, Tilray owns 21% of the U.S. multistate operator, and until then investors can focus on the positive adjusted earnings [EBITDA] that’s been running non-stop for fourteen quarters now.

For Morningstar, I’m Andrew Willis.

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About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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