Canadian pot producer Tilray(TLRY) has merged with rival Aphria, a move that gives it a handful of U.S. businesses as Democrats in Washington try to move forward with legal cannabis reform. So should you buy TLRY stock now?
The deal gives the combined company a market value approaching that of Canopy Growth(CGC), currently the largest pot stock. Tilray, post-merger, has a market cap of around $6.7 billion, according to Marketsmith. Canopy's market value is around $7.9 billion.
Along with their recreational businesses in Canada, the merger gives the combined company the old Tilray's medical business in Europe and Australia — as well as its debt. It also folds in Aphria's pharmaceutical distribution business, which, rather than cannabis, had driven a majority of Aphria's sales.
The deal also brings together a handful of U.S. businesses: Manitoba Harvest, a company owned by the old Tilray that sells hemp granola and CBD products, and SweetWater, "a leading cannabis lifestyle branded craft brewer" owned by Aphria.
Some analysts have questioned whether that infrastructure would be enough to capture more business in THC products, should the U.S. legalize cannabis on a federal level.
Democratic Sens. Chuck Schumer, Ron Wyden and Cory Booker this week announced the release of draft legislation intended to end federal cannabis prohibition and open up financial access to cannabis businesses. But Canadian entry into the U.S., if it's ever allowed, won't be easy.
Meanwhile, CEO Irwin Simon has asked shareholders to support a proposal allowing it authorize additional shares, a move it said would boost growth.
Simon, in a letter to shareholders, said the proposal "would authorize additional shares of our common stock so that we can move quickly to accelerate growth through potential acquisition and financing opportunities."
Approving that proposal didn't mean those shares would be issued, he said. They would only be available if needed to pursue those goals.
Simon recently told CNBC he "absolutely" welcomed the retail traders that have launched shares of the pot producer and those of GameStop(GME) and AMC Entertainment(AMC) higher this year.
Below, we take a closer look at TLRY stock.
TLRY Stock Fundamental Analysis
Earnings growth is a staple of top stocks. But the EPS Rating of TLRY stock stands at 29, with 99 being the best possible. Othermarijuana stocksalso have not-great profit ratings, as they continue to lose money. The EPS Rating is a gauge of a company's profit growth.
TheComposite Ratingof TLRY stock stands at 34, according toMarketsmith chart analysis. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.
Analysts expect Tilray to lose money through this fiscal year and the next one. The company'sSMR Rating— or Sales + Margins + Return on Equity rating — is a weak E. The rating tallies the past three quarters of sales growth, pretax and after-tax profit margins and return on equity.
Tilray Stock Technical Analysis
TLRY stock began trading in July 2018 on the Nasdaq via an IPO. That IPO was the first on a big U.S. exchange from a pure-play cannabis company.
But the stock largely fell between then and September of last year, after industrywide concerns about profitability, sales growth and cash grew more severe.
This year, shares soared as much as 711%, hitting 67 on Feb. 10. The stock is off those levels, and recently lost support at its 50-day line. Shares are not in a buy zone, and no new base pattern has formed.
Is Tilray Stock A Buy?
Shares of Tilray are not in a base or in buy range. So TLRY stock is not a buy right now.
IBD advises investors to focus on stocks with stronger fundamentals that are moving into buy zones.