Tilray Stock: Risky Growth Stock or Value Pick?

Is Tilray stock a reasonable bet long-term investors should think about making right now, or is this stock too risky to buy right now?

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The cannabis sector is a fast-growing one, expected to see worldwide sales really $176 billion by 2030. For investors in Tilray (TSX:TLRY)(NASDAQ:TLRY) stock, this growth has been the key investment thesis for some time.

However, actual growth rates in Canada for marijuana sales have underperformed of late. Previous excesses in the valuation of cannabis stocks have led to quite the downturn for Tilray. Today, Tilray stock trades at a small fraction of its previous high, down well more than 90% from its peak.

Will growth investors return to the cannabis sector? And if so, will Tilray stock be one investors pick? Let’s dive in.

Tilray posts positive net income, pushing for more market share

Well, there’s some good news for investors look at Tilray stock from a fundamentals standpoint.

Earlier this month, Tilray announced its earnings. The company posted a net income of roughly US$6 million in its latest quarter in comparison with a net loss of approximately US$89 million in the same quarter in 2021. The organization stated that its net income for the quarter that ended on November 30 broke even on a per-share basis. As a reference, the same quarter of 2021 saw a loss of $0.41 per share.

These solid numbers did boost Tilray stock 15% immediately following these results. However, since the earnings report, Tilray has seen selling, as recent macro headwinds hit growth stocks hard. The potential for rising interest rates has investors in more speculative areas cautious, leading to valuation compression among companies like Tilray.

That said, investors looking for growth may like Tiray’s push into the hemp market and CBD-infused beverage market. Clearly a risky pick, Tilray stock is one that has inspired near-term rallies some retail investors may be enamoured by.

More positives for Tilray stock

Investors should also remember that Tilray has made some acquisitions to broaden its portfolio. The company recently bought SweetWater Brewing and Breckenridge Distillery to deliver growth in the beverage category. Also, Tilray purchased Manitoba Harvest to drive its market share in consumer packaged goods.

To reflect its transition from a Canada based licensed cannabis producer to a global consumer packaged goods organization, Tilray has planned to use Tilray Brands Inc. as its new parent brand name.

Tilray Brands is looking forward to growing its presence in the United States and internationally. Along with all its growth opportunities, the company anticipates producing annual revenue of $4 billion by fiscal 2024. Now that’s a substantial jump! 

Bottom line

The reality is that the market is taking a risk-off approach right now. Tilray, once a meme stock (before the term was “cool” by WallStreetBets standards), has seen its share of surges in the past. However, shifting investor sentiment away from growth and toward value could hamper this stock in the near term.

That said, these recent results are a positive. Perhaps Tilray stock is a decent pickup at these levels. Time will tell.

For now, I remain on the sidelines with respect to Tilray due to its risk profile.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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