Are These 4 New Moves Making Tilray Brands Act Stock?

As a multinational alcohol and cannabis company, it’s no wonder that Tilray Brands (TLRY 1.07%) has more than one iron in the fire. What might come as a surprise is that he has so many different irons in the fire that he can advance a handful of plans at once without slowing down.

But the question of whether these efforts make the stock worth investing in is a separate issue. After all, it’s easier for a business to burn money than to create value. So here’s what you need to know about the financial impact of Tilray’s latest actions.

This beer move becomes part of the grand strategy

Tilray’s liquor business just got a significant boost.

Acquired four craft breweries from Molson Coors Beverage Company for an undisclosed amount, as it announced on August 13, mirroring the similar but much larger acquisition of craft beer brands in 2023. In line with its strategy to “premiumize” its alcohol segment while expanding it , new craft beer brands will likely cater to more expensive tastes than mass market beers. And, management says the new assets will help it realize cost synergies in distribution as well as new revenue.

It’s hard to overstate the importance of the geographic aspect of the acquisition, which will give Tilray reach into key regions of the US where its other brands currently don’t reach. It will now have a presence in the Midwest, South, Southeast and Pacific Northwest, fulfilling some of management’s expansion plans in the most profitable beer markets, such as Texas. The ultimate goal is to be one of the top brewers in the US, a $100 billion market.

Given Tilray’s steady progress in growing craft beer market share and acquiring more breweries, investors can have a measure of confidence that the plan will continue as long as financial resources allow. In the fiscal fourth quarter ended May 31, Tilray’s alcohol segment reported a gross margin of 53%, bringing in a gross profit of $40.8 million. So the relatively new segment is already contributing to the bottom line rather than detracting from it, which is great news for shareholders.

Gaining ground on the EU cannabis scene

Tilray’s marijuana business has also seen some new developments that could make its stock more attractive.

First, he sought and successfully obtained licenses to grow and sell medicinal cannabis in Germany. Its tight integration with Germany’s medical marijuana programs means its chances of gaining significant revenue from the market are now much higher than before.

But the full legalization of a large-scale recreational marijuana industry in the country remains an elusive goal that may never happen, so it’s important to recognize that medicinal programs can only be as good as they are good.

Thus, in another recent move, Tilray published on July 9 the results of a study it conducted by measuring the impact of medical cannabis on patients over 50 years of age. While the study findings (namely that 45% of patients experienced less pain and better sleep quality). ) aren’t exactly amazing, the study probably wasn’t intended as marketing material for potential customers.

Instead, it can serve as evidence to regulators in the EU and elsewhere that the business is covering its bases in demonstrating that its products are safe and at least likely to be effective for their intended purpose, rather than just a workaround. for the sale of recreational cannabis.

Actions like these are likely part of the reason Tilray was able to secure approval in Portugal for its third medicinal cannabis product in late July. The product is a liquid cannabis extract intended for oral administration. As in the German market, there is not necessarily a clear path to full legalization in Portugal, and the margins associated with the medicinal segment are higher anyway.

Therefore, while the new approval will likely increase revenue slightly, it will not result in an exception.

Keep this progress in context

It’s hard to argue against the idea that these four moves leave Tilray in a better place than before. However, especially for risk-averse investors, four pieces of good news don’t necessarily add up to must-buy stocks.

While the craft beer acquisitions are likely favorable for the company’s long-term outlook and a modest reason to load up on some shares, the marijuana developments are a bit overwhelming. There is nothing wrong with engaging productively with regulators or conducting studies to support these commitments. But given the slow-moving nature of the EU cannabis market, it’s hard to say at this point that the company’s recent achievements change much in terms of the investment case.

The ambitious vision for Tilray to be the world’s largest seller of marijuana, with operations in North America and Europe, is still far from being realized. For now, alcohol is sure to be a much larger component of its revenue than marijuana, whereas before they were about equal.

In short, those who rate Tilray as a marijuana stock may need to change their perspective before they can appreciate why it might be worth buying, because for now it looks like the brightest part of its future is focused on beer.