TLRY Stock Prediction: Tilray Inc is Rallying Strong, But Is it Sustainable?

TLRY Stock Surge

It’s hard to find a more disappointing stock in the marijuana industry than Tilray Inc (NASDAQ:TLRY). Sure, some are worse performers, but none had the same amount of hype followed by such a precipitous fall. But Tilray stock fortunes have turned around of late, with a huge rally to start June. Does that mean the TLRY stock prediction is suddenly rosy again? I’d caution investors to be a little wary before hopping back on the bandwagon.

First, let’s examine why TLRY stock has been doing gangbusters as of late.

Chart courtesy of StockCharts.com

The overall rally in June has certainly helped. While many marijuana stocks are surging in the summer month, Tilray stock especially has been on a tear, for reasons we’ll engage with below.

But sufficient to say that things are looking up for the entire marijuana industry, Tilray Inc included.

But something unique is happening with TLRY stock, that can’t be discounted – the company climbed nearly 19% by Monday afternoon. A 20% gain in a single day of trading is absolutely nuts.

The company’s huge gain was motivated in part by the announced deal with its majority shareholder, a cannabis company backed by venture capitalist Peter Thiel, to sell the fund’s stake gradually over the next two years. (Source: “Tilray surges on plan to release 75 million shares held by cannabis company backed by Peter Thiel,” CNBC, June 10, 2019.)

Privateer Holdings created Tilray in 2013 and took it public last summer. Thiel’s Founders Fund was an early backer of Privateer in 2014. Privateer holds 77% (75 million shares) of Tilray’s outstanding shares, worth roughly $3.0 billion. At the company’s peak many months prior, it was worth over $16.0 billion. With Privateer’s stake set to be released over the next two years, Tilray hopes this will clear the stock overhang.

Tilray will acquire Privateer in a downstream merger, with Privateer’s current stake being released to the market over the next two years. In the first year following the transaction, shares will be sold to institutional and strategic investors, determined by Tilray. Remaining shares will be released over the second year at a staggered rate.

“Privateer is giving Tilray a lot of operational flexibility and obviously believes in long-term value of this business and is not pushing to sell its shares as soon as possible, so it’s kind of mutually beneficial, this transaction, for both parties,” said Tilray Chief Financial Officer Mark Castaneda. (Source: Ibid.)

So what we have here is a buildup of excitement in an already frothy market—in other words, a recipe for massive gains.

The question, then, falls to whether these gains are sustainable long-term and if the future of TLRY stock is now on the up-and-up.

Tilray Stock Prediction

When it comes to my Tilray stock prediction, you have to look back before you can look forward:

Chart courtesy of StockCharts.com

While the recent success is all well and good, that does little to offset the company’s awful performance in 2019 so far. Just look at the chart above: one of Tilray’s top competitors, Canopy Growth Corp (NSYE:CGC), has seen enormous gains in 2019, while TLRY has not just slumped, but practically fallen off the face of the earth.

The company is getting hit, hard, and much of that is due to its massive surge when it first went public. By jumping so high so fast, Tilray stock quickly turned into a bubble, one that instead of bursting has instead seen the air let out in a long, drawn-out decline that has been at work since last summer.

As it approaches its one -year anniversary as a publicly traded stock, Tilray Inc has seen one of the worst years on the marijuana market, period.

So does the company have any hope for redemption? Absolutely.

While much of Tilray Inc’s earlier rise was due to hype, there is still substance to what the pot company offers. Not to mention that it operates on the Nasdaq, an exchange that I believe to be better suited for marijuana stocks.

In the end, however, there are a lot of question marks surrounding whether Tilray stock can sustain these gains long-term.

I’ve written before how I project that TLRY stock would fall below $40.00 unless a big turnaround event took place; I don’t think that this share release is that deal.

While it will generate gains for a short while, long-term, TLRY stock will once again begin to tumble downward.

For investors, that means that day traders have an excellent opportunity here to make quick gains and cash in on the volatility. For long-term investors, I think that they are better served looking elsewhere on the marijuana market.

The thing is that TLRY stock’s extreme volatility—and inaccurate valuation—have made it hard to gauge, with the company have the potential to double or halve within the next 12 months depending on a number of factors. Few pot stocks carry this amount of risk.

But there is also almost no other company of Tilray Inc’s size that can register 20% gains in a single day; it would take a lot more to motivate these types of gains from, say, Canopy Growth.

As such, there is value in TLRY stock, but it comes with a healthy serving of risk.

Analyst Take

When I write about Tilray Inc, it feels like I’m back at the start of the marijuana market again. Not because of the company’s massive potential, but instead due to its volatility; it feels very much like anything can happen with Tilray stock.

As such, my prediction for TLRY stock is tentative. It’s hard to make a solid pronouncement regarding the company when so much of its past has been unpredictable.

Still, there is money to be made from Tilray stock. It will take nerves of steel and an ability to weather severe dips, but for investors looking for quick cash, TLRY stock may be for you.