Tilray Brands (NASDAQ:TLRY) remains a cautious investment, according to Zuanic & Associates, despite its solid balance sheet and diverse global assets. With a "Neutral" rating, Zuanic views Tilray as a long-term player in the cannabis sector, though short-term uncertainties cloud its outlook.

Tilray's international presence is expanding, notably in Germany, where sales have grown 50%. Yet, headwinds persist, including high operating expenses, rising share count and ongoing market share losses in Canada where Tilray has opted against aggressive discounting in certain product categories.

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U.S. Beverage Expansion Shows Potential

In the U.S., Tilray has bolstered its beverage portfolio with craft beer brands acquired from Molson Coors (NYSE:TAP), positioning itself to gain ground in the non-alcoholic hemp drink market – a segment showing explosive growth potential.

Still, Tilray's revenue, at $200 million for the August quarter, trails its $950 million target for FY25, casting doubt on near-term growth momentum.

Rising Costs And Dilution

Tilray's operating expenses remain a point of concern, with Selling, General & Administrative (SGA) costs reaching 34% of sales in the first quarter of FY25 – an increase from 31% in FY24. This rise in cash SGA expenses has contributed to a 300 basis point drop in Tilray's adjusted EBITDA margin.

Additionally, Tilray's share count has grown significantly, increasing from 657 million in FY23 to 903.3 million by October 2024. While this higher share count bolsters liquidity, it also affects per-share revenue metrics.

Despite the dilution, Tilray's revenue per share has remained stable, reflecting accretive growth from recent acquisitions. However, the increased equity base will require the company to continue driving organic growth to justify valuation metrics and support long-term investor confidence.

Read Also: EXCLUSIVE: Tilray CEO Irwin Simon On Why US Cannabis Rescheduling Won't Change A Billion-Dollar Play

Valuation Premium And Investor Outlook

Valued at an estimated $1.67 billion, Tilray trades at a 1.7x EV/sales multiple, with its cannabis segment trading at a premium of 4x, well above industry norms.

While Tilray's liquidity and extensive market reach make it a formidable global contender, Zuanic advises investors to await clearer evidence of sustainable growth across international markets and gains in operational efficiency.

Path Ahead: Strategic Global Expansion

Tilray's journey hinges on its ability to capitalize on international cannabis expansion, reinvigorate its U.S. brands, and improve financial performance. For now, Zuanic & Associates suggests that potential investors stay on the sidelines, with Tilray's future resting on a steady, strategic push through emerging global markets.