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Tilray stock rallies as investors cheer Whole Foods deal and look past revenue miss

By Steve Gelsi

Tilray shares get a boost on Whole Foods deal and an unexpected profit

Tilray Inc. shares bucked a down market on Wednesday after the Canadian cannabis company posted a surprise profit and said it inked a distribution deal with Whole Foods for its Manitoba Harvest hemp products.

Tilray (TLRY)CEO Irwin Simon said investors continue to look down the road to U.S. cannabis legalization as they decide "which horse they're gonna get behind" when it happens.

The company managed to turn a third-quarter profit although that was due to a boost from non-operating income; it also executed its plan to grow globally and reiterated its strategy to get to $4 billion in revenue by the end of 2024 from a projected $645 million in revenue in 2022.

"We're diversified in regards to cannabis; plus we've got our spirits business and the Whole Foods deal," Simon told MarketWatch . "There's a lot of components there. Crap will happen out there. Again, we do have multiple levers to pull when that happens. That's what's important. I hope the stock is up because of the competence and confidence we've expressed in achieving these things."

Shares of Tilray rose 12.5% on Wednesday. The stock is up 12.5% so far in 2022, compared to a 23.6% drop by the AdvisorShares Pure U.S. Cannabis ETF (MSOS).

Also Read: Tilray agrees to buy up to $211 mln in Hexo debt

The stock moved up despite less-than-upbeat comments about its quarterly performance.

Benchmark analyst Mike Hickey reiterated a "hold" rating on the stock and summed up Tilray's quarterly results as "disappointing" on both revenue and adjusted Ebitda.

"We expect continued competitive pressure in the Canadian market will challenge market share expectations, with Tilray (at) an approximate 10.2% market share," he said. "Growth continues to benefit from non-cannabis segments including alcohol and wellness categories. The significant cost synergies from Aphria-Tilray combination are not offsetting revenue weakness."

Meanwhile, Tilray unit Manitoba Harvest said its hemp powders will be exclusively available at 300-plus Whole Foods Market locations nationwide for the next 90 days as part of a tie-up between the two companies.

Whole Foods, which is owned by Amazon.com Inc. AMZN, -3.44%, will offer Manitoba's Hemp+ Matcha and Hemp+ Supergreens powders. After 90 days, the products will continue to be available at Whole Foods and other locations across the U.S. and Canada.

Simon, who founded The Hain Celestial Group Inc. (HAIN), said the relationship with Whole Foods may encourage other retailers to carry products from Manitoba Harvest.

"The big thing is consumers want products infused with hemp either for the protein or their [special] diet," said Simon. "It used to be the case that retailers would not take hemp products because of their association with cannabis. If cannabis is made legal, would Whole Foods sell cannabis? Maybe."

In its quarterly financial update, Tilray said it swung to third-quarter net income of $43.19 million, or 9 cents a share, from a loss of $273.52 million, or $1.03 a share in the year-ago quarter.

The latest quarter included $72.7 million in net non-operating income, compared to a non-operating expense of $220 million in the year-ago quarter.

The company's operating loss narrowed to $19.8 million from $24.1 million.

Third-quarter net revenue rose 23% to $151.9 million from $123.9 million and about $4.3 million short of the Wall Street target.

Analysts expected Tilray to lose 8 cents a share on revenue of $156.2 million, according to a FactSet survey.

The revenue miss was partly attributed to losses in currency trades as well as softness in the Canadian cannabis market partly due to COVID-19 restrictions, according to Simon.

He remains confident the Canadian market will improve. Tilray maintained its No. 1 position in the cannabis flower market in Canada.

"I feel good about Canada and what we're going to do there," he said.

Tilray said it expects to reach its $80 million synergy target from its Aphria acquisition five months ahead of schedule by May 31 and to book an additional $20 million in synergies in fiscal 2023.

In the U.S., Tilray's SweetWater Brewing, Breckenridge Distillery, and Manitoba Harvest businesses continue to generate positive Ebitda. These brands will be home to THC-based products upon U.S. federal legalization.

Also Read:Cannabis stocks rally on flurry of federal moves toward legalization

Companies editor Ciara Linnane contributed to this report.

-Steve Gelsi

 

(END) Dow Jones Newswires

04-07-22 0816ET

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