Shares of global cannabis-lifestyle and consumer packaged goods firm Tilray Brands (US:TLRY) slipped a -6.44% in trading on Monday after reporting a lackluster second quarter result.
For the third quarter, Tilray Brands reported a -7% decline in sales to $144.14 million from $155.15 million in Q3 of 2021.
On a constant currency basis, the Cannabis business and Wellness business segments saw revenues decline over the year to $52.16 million and $13.07 million respectively. The Distribution business and Beverage Alcohol business segments showed an improvement in sales to $70.95 million and $21.39 million respectively.
Underlying profits measured by adjusted EBITDA declined by -15% over the year to $11.71 million and missed consensus forecasts of around $15 million but remained in positive territory for the 15th consecutive quarter.
At the bottom line, the company generated -$61.63 million in net losses during the quarter compared to net profits in the prior year of $5.79 million. This equated to negative EPS of -11 cents per share.
When removing one off items, the company told investors its adjusted net losses actually improved by 9% over the year to -$35.3 million or EPS of -6 cents. The adjusted EPS figure was in-line with analyst consensus figures.
For the full year, Tilray management believes it can generate $70 to $80 million of positive adjusted EBITDA. The street does not remain confident that the company will meet this target with the full year consensus EBITDA forecast at $68 million.
Tilray’s Chairman and CEO Irwin Simon told investors “We are close to achieving our increased annualized cost savings target of $130 million” which he believes will position the company to realize benefits as market dynamics improve.
When discussing the outlook for the company, Irwin discussed the three key geographic segments. In Europe, Tilray is well-positioned to capitalize on the growing acceptance and legalization across the continent. In the U.S. market, Tilray intends to continue to expand the lifestyle CPG brands business which is profitable through continued acquisitions and investments.
For the tougher Canadian market, CEO Simon said “we will be patient and strategic in building our competitive positioning amid the price compression and difficult operating conditions that we expect will, inevitably, consolidate the oversupply of licensed producers”
Analysts John Zamparo and Monica Lutz from CIBC Capital Markets believe Tilray’s full year EBITDA guidance may be difficult to achieve with only two quarters in the financial year remaining.
The firm highlighted that the cost savings so far have only offset other headwinds coming from currency FX and Cannabis product margins. CIBC kept its ‘neutral’ call on the stock firm after the result but lowered the target price for the call to $3.25 from $3.75.
Fintel’s rating change tracker noted that Bernstein Research initiated coverage of the stock with a ‘Market Perform’ rating at the beginning of November with a $3.90 target.
The Fintel average consensus target price of $4.36 suggests the stock could see more than 50% upside in 2023 if supply and demand market dynamics stabilize in the Cannabis market.
The chart to the right from TLRY’s forecast page shows consensus forward forecasts for EBITDA estimates. The street continues to remain bullish on the Cannabis sector recovery and Tilray’s ability to grow profits as the company reduces overhead costs.
Research on the Fintel platform highlighted growing optimism in the options market sentiment for TLRY. This has been explained by Fintel’s put/call ratio of 0.16 which has consistently tracked lower over 2022.
The put/call ratio is determined by analyzing all put and call interest in the market for a stock over time with values towards 0 indicating stronger bullish sentiment as it means call open interest carries greater weight than put interest.
The ratio began the year above 0.50 and has moved lower with the share price. At current share price levels, investors remain bullish on the company with significant call option demand in the market.
The chart below shows how this ratio has tracked over 2022.
TLRY is currently the 18th most held security by retail investors who have linked their portfolio with the Fintel platform for free. The average position size is $10.1K per retail investor.
This story originally appeared on Fintel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.