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Tilray focusing ‘outward’ from Canada to Europe and US, Melius Research says

Analysts at the firm said the European market is among the ‘best on price protection’ with less of the boom and bust on capacity build likely to occur in Canada
A cannabis facility
Tilray reported fourth-quarter earnings that missed estimates, citing higher operating costs from expanding international teams and and costs related to M&A

Tilray Inc (NASDAQ:TLRY) is focusing on the larger markets of Europe and the United States instead of Canada, analysts at Melius Research said.

The company was committed to pursuing global growth opportunities, Tilray CEO Brendan Kennedy emphasized during a fourth-quarter earnings call. 

“Tilray made fairly pointed comments on its 4Q call with respect to excessive valuations on production assets in Canada, and stated its focus is on growth in the larger US and European markets,” wrote Melius analysts Rob Wertheimer and Marissa Schlueter to clients Tuesday.

READ: Tilray misses 4Q earnings estimates but shares rally in pre-market trading

“There’s not much to disagree with in that, especially given where Tilray stands today on capacity," they added. "There’s no point in building more into the market that will soon be oversupplied, and no point in buying supply at a premium.” 

The analysts wrote that Tilray was focused on the European medical market, estimated at $100 billion in terms of an addressable legal market.

“It’s probably among the best on price protection as well, with less of the boom and bust on capacity build that we will see in Canada,” wrote the analysts.  

Tilray has product harvested in Portugal and is waiting for certification to begin sales.

“Its current capacity should be sold through on existing demand, and Tilray believes future capacity will see similar take-up on demand,” wrote the analysts.

Quarterly revenue

The Nanaimo, British Columbia-based cannabis company reported revenue of US$15.5 million in the fourth quarter, against analyst expectations of US$17 million.

Tilray's net loss during the fourth quarter was $31 million, or $0.33 per share, against a net loss of $3 million, or $0.04 a share, a year earlier. 

Melius has a an Underweight rating and a $48 price target on the stock.

Tilray was up slightly, trading at $70.13 in Wednesday's late-afternoon Nasdaq trading.

Contact Uttara Choudhury at [email protected]

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