Competition is fierce in the cannabis industry. The Canadian market in particular has a litany of producers and sellers. The consequence of almost 1,000 licensed players elbowing each other for market share has been margin compression for most and losses for many.
As smaller producers creep into the market and steal market share inch by inch, large players feel the squeeze and cut prices, which hurts profitability.
It’s easy to dismiss the sector as a whole. How can you find the winner with so much stiff competition?
A little digging reveals one stock, however, has the potential for colossal growth.
Tectonic Shift In Cannabis Market
It’s widely expected in the next few years that Germany will be the first European country to permit full adult legalization. This is expected to be the precedent needed to create a tectonic shift among other European countries.
So who will benefit most from the regulatory change?
Enter Tilray Brands.
Tilray has the largest medical marijuana operation in Germany by a stretch. If any company is set to enjoy the windfall from the legalization plan, it’s Tilray. Indeed the odds of Tilray hitting its goal of 8x’ing annual sales is high if marijuana reform is enacted in Germany, let alone if legalization spreads across Europe.
It won’t be a surprise to close followers of the industry to see Tilray benefit most thanks to its first-mover advantage and having operations established already. Others will be playing catch up.
Colossal Growth Ahead?
Tilray Brands has the makings of a global cannabis leader. The company is engaged heavily in the life cycle of cannabis products, including research, cultivation, production, marketing, and distribution.
It has five segments:
- Cannabis Business,
- Distribution Business,
- Beverage Alcohol Business,
- Wellness Business, and
- Business Under Development
Tilray’s customer base is broad, and includes pharmacies, clinics, hospitals, and even governments. It has operations globally in Canada, USA, Australia, Europe, New Zealand and Latin America.
The company is forecast to generate $1 billion in sales by 2024 and $2 billion by 2030. But we think those forecasts are pessimistic.
The company has already demonstrated exceptional growth. Here’s a snapshot of revenue growth in recent years:
- 2015: 202.9%
- 2016: 77.9%
- 2017: 84.6%
- 2018: 110.8%
- 2019: 24.3%
- 2020: 23.7%
- 2021: 24.0%
If the company can keep that 24% growth trajectory on pace for the next 8 years through 2030, which would be very achievable if German regulation comes to pass and other European countries follow suit, Tilray stock has colossal growth potential ahead.
Even at current levels, we see the share price undervalued to the tune of 29.8% with fair market value sitting at $4.45 per share.
The bottom line is the future looks very bright for Tilray and if you were to steadily scoop up shares over the next few quarters as part of a dollar cost averaging strategy you could be in for some serious upside potential.
- Tilray leads the Canadian cannabis market, ahead of Canopy Growth, TerrAscend, The Cronos Group and Aurora Cannabis.
- It has the largest operation in Germany for medical marijuana. Legalization in Germany should be the catalyst to significant revenue growth in Europe.
- Tilray operates on just about every major continent and has a wide breadth of customers
- The company is fundamentally undervalued by almost 30% already, before any catalysts kick in.
- Tilray’s Aphria acquisition in May 2021 appears to be paying off handsomely.
- It’s the largest cannabis company in the world by market cap, and should extend its lead over the next decade.