Tilray Inc’s (NASDAQ:TLRY) Epic 755% Rally

Tilray Inc (NASDAQ:TLRY) is up almost 800% since its July IPO, making it Canada’s top-performing cannabis stock.

| More on:

Vancouver-based Tilray (NASDAQ:TLRY) became the largest cannabis stock Tuesday after a late-summer rally sent its market cap as high as US$14.4 billion. While Canopy Growth (TSX:WEED)(NYSE:CGC) had a larger nominal market cap, Tilray was worth more after accounting for the CAD-USD exchange rate.

From the time of its IPO, when it traded for just $17, to its Tuesday close of $154, Tilray shot up a staggering 755%. The stock’s volatility was out of control on Wednesday, when traded in a range between $182.50 and $233.

While all Canadian pot stocks have done well this summer, Tilray is up the most by far. This is strange given that the company’s annual revenues fall short of Canopy’s at around $20 million (compared to Canopy’s $70 million). However, when we look closer, there are some obvious factors driving the major rally that Tilray is currently experiencing. The clue to the first lies in the ticker symbol.

U.S. listing

Unlike Aurora Cannabis or Aphria, Tilray has a U.S. listing. Specifically, it trades on the NASDAQ. Although the company is based in Nanaimo, B.C., management decided to list the company on the NASDAQ to court U.S.-based institutional investors.

This may have been a wise decision. Although there’s nothing stopping U.S. investors from buying TSX stocks, the CAD-USD exchange rate adds a layer of complexity to cross-border investments. In addition to all the usual calculations you have to make when analyzing a stock, you need to factor in the effect of currency fluctuations when investing on an exchange based in a country other than your own.

For example, if you’re based in Toronto and you buy $100,000 worth of U.S. stocks, and the U.S. dollar declines 20% against the loonie, you’ve technically lost 20% of your Canadian dollar value. Although the effect ends up being the same as if you had held your stocks in the U.S. account, the currency fluctuations make calculating your returns more difficult.

It’s possible that Tilray is attracting U.S. investors who don’t want to deal with the confusion of buying stocks on the TSX. Cannabis is a hot topic in the U.S. as well as Canada, and Tilray is one of the more straightforward cannabis plays for them to make. And since the population south of the border is about 10 times higher, that naturally results in a lot of money pouring into Tilray.

Close to profitability

Another factor that could be driving Tilray’s growth is the company’s financial performance. Although Tilray has had persistently negative net income (like most cannabis stocks), it’s closer to profitability than Canopy, its closest competitor.

In 2017, Tilray had a net loss of around $7 million on revenues of about $20 million. Canopy, however, lost $70 million on revenues of about $78 million. Additionally, Canopy’s net loss is growing larger over time, reaching as high as $90 million in the most recent quarter. Put simply, Tilray’s net loss is proportionately smaller (compared to revenue) than Canopy’s is. This could have the effect of attracting investors who expect their cannabis stocks to actually turn a profit someday, rather than simply gaining in the market because of hype.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

More on Investing

hand stacking money coins
Dividend Stocks

Want Decades of Passive Income? 3 Stocks to Buy Right Now

These Canadian stocks have been consistently rewarding shareholders with regular dividend payouts for decades.

Read more »

A plant grows from coins.
Investing

3 Top Growth Stocks to Buy for December

Here are three top Canadian growth stocks long-term investors may want to consider adding before the end of the year.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

3 Dividend Aristocrats to Buy and Hold for Decades

The buy-and-hold Dividend Aristocrats, especially those offering decent capital appreciation or preservation potential, can form the backbone of a strong…

Read more »

exchange traded funds
Dividend Stocks

2 High-Yield Dividend ETFs to Buy to Generate Passive Income

BMO High Dividend ETF (TSX:ZDV) and another top dividend ETF are worth holding onto for years.

Read more »

Man data analyze
Dividend Stocks

Outlook for Brookfield Asset Management Stock in 2025

Brookfield Asset Management is a TSX dividend stock that has crushed broader market returns over the last two years.

Read more »

The letters AI glowing on a circuit board processor.
Energy Stocks

Maximizing Returns: How Canadian Investors Can Profit From AI’s Growing Energy Needs

Renewable energy stocks like Brookfield Renewable Partners (TSX:RNW) profit from AI's extreme energy usage.

Read more »

TD Bank stock
Bank Stocks

TD Bank Stock: Buy, Sell or Hold for 2025?

TD Bank stock slipped after reporting fourth-quarter 2024 earnings.

Read more »

oil pump jack under night sky
Energy Stocks

3 No-Brainer Oil Stocks to Buy With $1,000 Right Now

The current geopolitical situation may not be conducive to oil price gains, but there are also positive catalysts.

Read more »