Canadian cannabis producer Tilray (TLRY) is expanding its product base and improving its bottom line. With new acquisitions and the stock off its 52-week low, is TLRY stock a bargain buy now?

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Shares have pulled back since the jump following news on Aug. 30, that the U.S. Department of Health and Human Services recommended that cannabis be rescheduled from a Schedule 1 to a Schedule 3 substance. Cannabis obtained the classification back in 1970.

Schedule 1 drugs include heroin and LSD and are said to have “no currently accepted medical use and a high potential for abuse,” as defined by the U.S. Drug Enforcement Administration.

Schedule 3 drugs are considered to have “moderate to low potential for physical and psychological dependence,” according to the DEA. The lower-class Schedule 3 drugs also do not have interstate restrictions like Schedule 1 drugs have and come with some business tax advantages.

Germany’s federal Cabinet approved a marijuana legalization bill on Aug. 16, according to Reuters, but the bill still has to pass Parliament.

TLRY Stock Gives Back Gains

Tilray shares sold off around more than 6% on Tuesday sending the stock below the converged 50- and 200-day moving averages. 

The stock bounced around in early September, then sold off over 12% in heavy volume when Kerrisdale Capital released a short report on the stock on Sept. 18.

The stock sank over 9% on Aug. 24, on news that competitor Curaleaf (CURLF) plans to sell recreational marijuana in Germany by the end of 2024, as legalization is on the horizon.

TLRY stock skyrocketed over 30% on Aug. 8 in heavy volume following a deal with Anheuser-Busch, retaking its 200-day moving average for the first time since December. The move was short-lived as it sold off the following two days to fall back below the 200-day line.

The stock soared nearly 15% on July 26 after the company reported a smaller-than-expected loss and higher sales in its May-ended quarter. TLRY retook its 50-day moving average on that move.

TLRY stock hit a 52-week low of 1.50 on June 21.

Its decline has been spectacular. Tilray went public in July 2018 at 17 a share and peaked exactly at 300 in September 2018. It’s now back around 2.40 a share.

Tilray shares have improved from their lows and are down about 9% on the year. TLRY stock has fared much better than competitors Canopy Growth (CGC) and Cronos (CRON), which are down about 60% and 16%, respectively.

Tilray Adds New CBD Drinks And Busch Beer Names

Tilray announced its diamond-infused pre-rolls on Aug. 30, under its RIFF brand to be sold in select regions in Ontario, Canada.

On Aug. 24, Tilray debuted its new carbonated CBD drinks under its Solei brand in Ontario, Quebec and Alberta, Canada.

Tilray announced on Aug. 8 that it entered into an agreement to buy eight beer brands from Anheuser-Busch (BUD) for an undisclosed cash amount. Brands in the deal include Shock Top, Breckenridge Brewery, Blue Point Brewing Company, Square Mile Cider Company and HiBall Energy.

The transaction includes breweries and brewpubs associated with the brands, according to the Wall Street Journal. The deal is expected to close sometime this year.

Losses Getting Smaller While Sales Grow

Tilray posted an adjusted loss of 1 cent per share in its fiscal Q4 earnings release July 26, which equaled last year’s same quarter. This beat FactSet’s forecast of a four-cent loss.

Quarterly sales rose 20%, a huge improvement over the 4%, 7% and 9% declines in the prior three quarters. Revenue got a boost from the company’s strong 43% alcohol beverage net revenue increase, while cannabis net revenue grew 21% vs. the prior year’s same quarter.

The company has saved $22 million out of its $30 million cost optimization plan that it announced in Q4 2022.

Tilray’s $43 million adjusted free cash flow far exceeded the negative $24 million in the prior year’s quarter.

“During the 2023 fiscal year, we delivered on our commitment to generate positive adjusted free cash flow across all business segments, and executed against our strategic plan to grow revenue, drive operating efficiencies, and improve margins and profitability, all while investing in our industry-leading brands,” said Irwin D. Simon, Tilray Brands’ chairman and CEO.

Tilray expects to achieve full-year fiscal 2024 adjusted EBITDA targets of $68 million to $78 million, representing growth of 11% to 27% as compared with fiscal year 2023, with positive adjusted free cash flow in 2024. The company reports its August-ended quarter on Oct. 4.

Tilray held on to its top spot in the Canadian cannabis market with an 8.5% market share in a recent report.

Some States Climb On Board, Others Slow To Warm Up

Kentucky State Senate President Robert Stivers hinted that he may approve limited use of medical marijuana for patients at the end of their lives, but he remains skeptical of its effectiveness.

Virginia also legalized pot but is not expected to have dispensaries until 2024.

Tilray’s chief strategy officer and head of international business, Denise Faltischek, sees favorable cannabis regulation in Europe ahead, but not until 2024.

Tilray Adds Partnership, Products

With the company not expecting U.S. legalization of cannabis on a federal level anytime soon, it is bolstering its alcoholic beverage presence and new products for additional growth.

Its strategy is to leverage its brands, infrastructure, expertise and capabilities to drive market share. Tilray’s growth plan focuses on new products and new geographies.

Tilray announced on Sept. 20, that its bestselling craft beer brands Montauk Brewing Company and SweetWater Brewing Company are now available at Atlantis Resort in the Bahamas, and will extend to other Caribbean locations.

Their Montauk Brewing brews were introduced into Georgia on Sept. 14, as part of a Northeast expansion.

TLRY Stock Fundamental Analysis

Earnings growth is a staple of top stocks. But the EPS Rating of TLRY stock stands at a weak 36 out of 99. Other Canadian marijuana stocks also have mediocre or weak profit ratings, as they continue to lose money.

Tilray’s Composite Rating has improved but is still a moderate 71, according to MarketSmith. IBD research says investors should focus on stocks with Composite Ratings of 90 or higher.

The company’s SMR Rating — which measures sales, profit margins and return on equity — is a suboptimal D.

Is TLRY Stock A Buy?

Shares of TLRY are not in a base or in buy range, so TLRY stock is not a buy right now.

In addition, look for Tilray’s fundamentals to continue to improve, including a return to profitability.

IBD advises investors to focus on stocks with stronger fundamentals that are moving into buy zones. Institutional investors also typically avoid low-priced stocks like Tilray.

Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.

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