Tilray stock price forecast ahead of earnings: buy, sell, or hold?

Tilray stock price has been in a strong bull run in the past few months, making it one of the best-performing companies in Wall Street. TLRY jumped from a low of $0.355 in June and peaked at $1.88 this month. So, will the stock continue doing well as it publishes its earnings this week?

Tilray Brands to publish its earnings

The Tilray stock price has been in a strong rally in the past few months. This growth was not because of its strong business performance. 

Rather, the company’s performance was mostly because of industry tailwinds as Donald Trump hinted that he would support the reclassification of marijuana into a less dangerous drug.

The enthusiasm of this process jumped after he shared a clip promoting the use of cannabis drugs by the elderly. However, he has not confirmed fully that he will support the industry as Joe Biden did. 

The next important catalyst for the TLRY stock price is the upcoming earnings, which will provide more color about its business. 

These results will be important because the last earnings report was worrying. The company said that its net revenue dropped to $224 million in the fourth quarter after making $229 million in the same period last year. 

Tilray Brands’ gross profit dropped to $67.6 million compared with $82.4 million in the same period last year. Most importantly, there are signs that the diversification efforts are not paying off. 

The diversification drive is faltering

For one, the beverage division made a revenue of $65.6 million in the quarter after it made $76.7 million in the same period last year. Its gross margin of 38% was also lower than the previous quarter’s 54%. This is notable because the company has spent millions of dollars acquiring beer brands from companies like Molson Coors and AB InBev. Its goal was to offset the weak performance of the cannabis segment. 

For the year, the beverage segment revenue rose by 19% to $240 million. The company blamed the weak performance of this segment to Project 420 and the national SKU rationalization. It hopes that the approach will lead to about $25 million in synergies.

The decline is also likely because Americans are not drinking as much beer as they used to in the past. Per capita beer consumption has been in a downtrend, which explains why stocks like Anheuser-Busch InBev, Molson Coors, Boston Beer, and Brown-Forman have plunged in the past few months. 

Tilray Brands’ cannabis business is not growing. Its revenue fell to $67.8 million in the fourth quarter, with the management blaming it on the pausing of vape and infused pre-roll categories. It also blamed it on international medical cannabis product delays.

At the same time, the company continues to lose substantial sums of money. It suffered a net loss of over $1.2 billion in the fourth quarter and $2.1 billion in the last financial year.

Therefore, the upcoming results will provide more information about its revenue and profitability growth, which will have an impact on the stock.

Tilray stock price technical analysis

The daily chart shows that the TLRY stock price jumped from a low of $0.355 in June to a high of $1.88 this month. It formed a cup-and-handle pattern, which is a common bullish continuation sign. 

Tilray stock has recently moved above the upper side of the cup at $1.52 and is now attempting to retest it. A break-and-retest pattern is one of the most bullish chart patterns in technical analysis. 

Therefore, there is a likelihood that the stock will bounce back in the coming weeks. If this happens, the initial target to watch will be this month’s high of $1.88 followed by the psychological point at $2.

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