Can Tilray stock pull back from fresh low?

Tilray shares have been on a downward spiral this year and fell to a new 52-week low last week, with investor sentiment shaken after the company announced a convertible bonds issue, with shareholders worried about the dilutive impact on their stock holdings. Positive news from Italy, following approval for the distribution of medical cannabis compounds to Italian pharmacies, failed to halt the decline.

• Tilray shares slumped to a fresh 52-week low at $1.63 on 1 June.
• Medical cannabis approval and educational deal in Italy fails to lift shares.
• Company refinances debt with convertible notes issue.

The Tilray Brands [TLRY] stock price has been on a downward curve for most of this year, and fell to a new 52-week low of $1.63 during last Thursday’s trading session.

The company had received some positive news from Italy, in the form of an approval for the distribution of medical cannabis compounds to pharmacies throughout the country, and a deal that provides access to 12,000 pharmacies for education and marketing of its products. Nevertheless, Tilray stock continued to fall.

It seems that investor sentiment was shaken after the company announced a new $150m convertible bonds issue, with shareholders worried about the dilutive impact on their stock holdings. The news ultimately helped pull TLRY shares under the $2.00 level for the first time.

What’s happening with TLRY stock?

TLRY stock fell a further 7.53% last week, dropping to a 52-week low at $1.63 intraday on Thursday 1 June, before a slight recovery to close out the week at $1.72.

TLRY has fallen 59.05% across the previous 12 months, and 37.45% so far in 2023, with investors concerned about the company's inability to meet its growth projections. Tilray has missed analysts’ revenue estimates in seven of the past eight fiscal quarters, according to Simply Wall St.

Italy double boost fails to lift Tilray stock

Tilray has successfully widened its pharmaceutical cannabis portfolio in Europe, after Italy’s ministry of health issued a green light for the distribution of three new medical cannabis compounds to the country’s pharmacies, through Tilray’s medical cannabis division and its Italian subsidiary. Tilray’s stock price nudged 0.83% higher intraday on 25 May following the announcement, before closing slightly lower on the day.

Tilray has also announced a strategic partnership with Italian drugs distributor Pharmaidea, to market and educate more than 12,000 Italian pharmacies on the benefits of medical cannabis and related patient care. Doctors can now prescribe medical cannabis extracts supplied by Tilray throughout the country. In Italy, medical cannabis is reimbursed by the healthcare system to eligible patients.

Tilray stock slides after $150m convertible notes issue

Tilray’s recent announcement of a $150m convertible senior notes issue, maturing in June 2027, has apparently unnerved some investors, prompting stock to drop 22.46% in extended-hours trading on 25 May, as the shares plummeted below $2.00. The downward move was prompted by investor concern over the possible dilutive impact of the offering, despite the company’s best efforts to reassure investors that it would be less dilutive than a common stock issue.

While Tilray works to strengthen its balance sheet, investors will be left disappointed by the negative share price reaction. Tilray will use most of the funds to repay other convertible borrowings maturing this year and in 2024, with $144.8m of the net proceeds to be used to repurchase a portion of its existing debt. The size of the offering means the deal will result in a small increase in overall interest.

Analysts paint positive outlook on Tilray stock

Analysts are largely positive on Tilray’s outlook despite ongoing delays to federal legalisation in the US, and regulatory headaches in Canada. Wall Street analysts have a ‘moderate buy’ consensus rating on Tilray, based on two ‘buy’ and three ‘hold’ ratings. The average TLRY stock price target of $3.50 implies a potential upside of 103.49%, according to TipRanks.

Among 14 analysts offering 12-month price targets polled by the Financial Times, there’s a median target of $3.00, a high target $5.00, and a low target at $2.25. The median estimate represents a potential increase of 74.42% versus Friday 2 June’s close at $1.72.

The consensus recommendation on Tilray stock is ‘hold’, with 12 of 16 analysts with the Financial Times holding that view. The remaining four analysts are positive on the company’s share price prospects, with two ‘outperform’, and two ‘buy’ recommendations.