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Tilray Earnings Impressive: More Reasons to Buy Marijuana ETFs

On Mar 18, Canadian cannabis grower Tilray Inc. TLRY reported fourth quarter and 2018 earnings after market close. Revenues of $15.5 million in the quarter boosted full-year sales to $43.1 million, showing a rise of 110% year over year.

Fourth-quarter sales growth was 204%. Analysts had called for fourth-quarter sales of $14.1 million, per CNBC, though the figure missed Zacks Consensus Estimate of $17 million. The surge in sales was driven by bulk sales, thanks to the legalization of recreational marijuana in Canada last October and augmented wholesale exports, per a CNBC article. 

Net loss in the quarter was $31.0 million or 33 cents a share versus $3.0 million or 4 cents in the year-ago period. The company also said that the number of kilograms of cannabis and derivative products rose nearly three-fold year over year to 2,053 kilograms in the fourth quarter. Kilograms sold in 2018 jumped over two-fold to 6,478.

What’s more appealing was Tilray said that it would swing toward more big-ticket investments in the United States and Europe, where the market is still budding offering more long-term opportunity than already-matured Canada. Shares of Tilray have rallied more than 2.4% after hour.

U.S. & Europe Market Gaining Attention

Notably, there has been a surge in merger and acquisition activities in the United States of late. Though pot remains entirely illegal at the federal level,total number of U.S. states greenlighting medical pot is now 33. And there are 10 states that okayed recreational use of marijuana.

In early March, Harvest Health & Recreation announced the acquisition of Chicago-based Verano Holdings for about $850 million in the largest U.S. pot deal. Last November, California-based cannabis retailer and producer MedMen had agreed to buy Chicago-based PharmaCann, a medical marijuana company, for $682 million (read: US Marijuana Market Warms Up to Merger Deals: ETFs in Focus).

The idea is to grab land fast and gain licenses to cultivate cannabis. Some analysts estimate that the U.S. CBD market could reach a worth of more than $20 billion by 2022, up from the current $600 million. Britain's first medical cannabis clinic opened in March. Things are looking up in Germany (read: Why Marijuana ETFs & Stocks Have More Room to Run).

Inorganic Expansion & R&D Activities

Tilray has been into inorganic expansion and research and development of late. In February, the company announced a deal to acquire the world’s largest hemp food maker Manitoba Harvest for up to C$419 million ($318 million) (read: Tilray's Deal to Buy Hemp Food Maker Bolsters Marijuana ETF).

In mid-December, Tilray announced that it would partner with AB InBev BUD to research nonalcoholic cannabis-infused beverages. In the same month, Tilray formed a pact with Sandoz, a segment of Novartis NVS. That deal looks to increase the global availability of medical cannabis products. 

ETFs in Focus

ETFMG Alternative Harvest ETF MJ is a pureplay fund in the space. The fund is seeing high momentum now. The underlying Prime Alternative Harvest Index enables investors to take advantage of both event-driven news and long-term trends in the cannabis industry. The fund is up 53.7% in the year-to-date frame (as of Mar 18, 2019).

Apart from pure-play MJ, investors can tap this growth via AdvisorShares Vice ETF ACT. Cannabis-related products occupy 25% of ACT, while alcohol with cannabis exposure has 5% and tobacco with cannabis exposure has received 12% focus. The fund is up 20.1% this year.

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Novartis AG (NVS): Free Stock Analysis Report
 
Anheuser-Busch InBev SA/NV (BUD): Free Stock Analysis Report
 
Tilray, Inc. (TLRY): Free Stock Analysis Report
 
AdvisorShares Vice ETF (ACT): ETF Research Reports
 
ETFMG Alternative Harvest ETF (MJ): ETF Research Reports
 
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