Cannabis investors woke up to a negative sell-side take on Tilray Inc. (NASDAQ: TLRY) Friday, with Jefferies calling the Canadian company's valuation unjustified.
The Analyst
Jefferies analyst Owen Bennett initiated coverage of Tilray with an Underperform and $61 price target.
The Thesis
Too much value is assigned to Tilray's partnerships with Anheuser Busch Inbev NV (NYSE: BUD) and Authentic Brands Group, Bennett said in the initiation note.
"We appreciate [Tilray] is well-placed in medical, but future value here will be driven by intellectual property, for which little visibility [exists] near-term," the analyst said.
The company's share structure also raise concerns of a risk of increased volatility, Bennett said.
Tilray’s valuation is too costly, the analyst said. "Our 10-year DCF-driven valuation suggests the stock is too expensive for its outlook, with an appropriate discount for long-term medical uncertainty not captured."
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Research suggests that Tilray lacks in the recreational market, as its focus has been on medical market, Bennett said.
Along with Canopy Growth Corp. (NYSE: CGC), Tilray is seen as a medical leader globally. Yet its lack of IP and drug formulations give Jefferies cause for concern about the company's long-term value, the analyst said.
Jefferies sees Tilray falling short of competitors Canopy and Aurora Cannabis Inc. (NYSE: ACB).
The research firm forecast 2020 calendar year sales for Canopy and Aurora that are 2.7x and 2.2x higher than Tilray's.
Price Action
Tilray shares were down 1.92 percent at $68.38 at the time of publication Friday.
Related Links:
Tilray Acquisition Of Manitoba Harvest Sets Early Pace For 2019 As 'Year Of Consolidation'
Tilray Harvests Medical Cannabis In Portugal, Ramps European Business
Latest Ratings for TLRY
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Mar 2019 | Jefferies | Initiates Coverage On | Underperform | |
| Feb 2019 | Seaport Global | Initiates Coverage On | Neutral | |
| Jan 2019 | PiperJaffray | Initiates Coverage On | Overweight |
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