Today, Tilray Inc. (TLRY:NSD) experienced a significant 12.6% decline in its stock value, and the cause of this abrupt downturn can be attributed to a report from Kerrisdale Capital, a well-known short-selling entity. The report was clear, giving Tilray a gloomy target price of $0.89. This implies a 70% drop from last Friday’s closing price. This substantial drop has unquestionably shaken the cannabis market, leaving numerous investors in disbelief. This article will highlight the influence of this drop on the TLRY stock forecast.
Accusations by Kerrisdale Capital:
Kerrisdale Capital’s report accuses the Canadian cannabis giant of relying on a precarious cycle of share dilutions to camouflage its fiscal instability and sustain its ongoing operations. To make matters alarming Tilray submitted a proxy statement after the market’s closing bell on September 15, requesting authorization to increase its authorized common share count from 980 million to 1.208 billion.
Tilray’s Risky Business Strategy:
The report goes on to question Tilray’s audacious diversification strategy, particularly its acquisitions in the craft beer sector, which include some Anheuser-Busch brands. This move appears unwise, as these new assets have seen declining sales and lackluster EBITDA margins. Such a strategy misstep raises concerns about the company’s long-term sustainability.
Misguided Rally Amid Regulatory Uncertainty:
Kerrisdale Capital’s report also takes aim at Tilray’s recent surge in value, alongside other U.S. cannabis stocks. It argues that this optimism is misplaced, given the uncertainty surrounding potential DEA marijuana rescheduling. If such a change occurs, it is expected to primarily benefit U.S.-based companies, putting Tilray at a distinct disadvantage.
Transparency Concerns:
Another point of contention in the report centers around Tilray’s opaque financial disclosures. It highlights that the company is using these transactions with key partner Double Diamond Holdings to artificially boost reported EBITDA and free cash flow. This casts a shadow over the company’s financial transparency.
TLRY Stock Forecast:
Based on the TLRY stock forecast by nine analysts, the average target price for the company over the next 12 months stands at $3.40. The average analyst rating is “Buy.” However, Stock Target Advisor’s analysis leans “Slightly Bearish,” influenced by three positive signals and five negative signals.
Current State of TLRY Stock:
In its most recent closing, the stock price rested at $2.56, marking a substantial decrease of -22.66% over the past week, -3.03% over the past month, and -19.75% over the last year.
Conclusion:
Tilray’s future looks uncertain due to a harsh report from a short-seller, forecasting a massive 70% stock price decline. The company’s reliance on share dilutions, questionable diversification choices, and regulatory uncertainties loom large on its prospects. Additionally, concerns about financial transparency further darken the horizon.
