Which is the best cannabis stock to buy? Tilray looks exciting

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 27, 2021
Updated: Sep 28, 2021
  • Tilray shares have plunged since rallying to new all-time highs in February.
  • The company’s sales have benefited from rapid growth in Canada’s cannabis industry.
  • Analysts expect earnings to grow rapidly from next year.

The cannabis industry continues to gain recognition amid increasing legalisation. More countries, nations, States, and jurisdictions have legalised cannabis for medicinal, recreational, and other uses, making it one of the most exciting places to invest.

As a result, some companies in the cannabis industry, like Tilray Inc. (NASDAQ:TLRY) have witnessed significant topline growth in recent years.

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The stock also gained the attention of retail investors, boosting the stock price through social media chatter.

Should you invest in Tilray shares?

Tilray operates across nearly all the major segments of the cannabis industry, including research, cultivation, production and marketing. In addition, the company has made some strategic acquisitions to boost growth while also creating operational synergies. 

Tilray’s sales posted an average annual growth of about 109% over the last five years. And in the most recent quarter, its top line grew by more than 900% sequentially, putting the company in a solid position to deliver another robust annual growth. The company is targeting $4 billion in cannabis sales, which could be boosted by the rapid growth of the Canadian cannabis market.

Canadian Cannabis sales for July grew by 46% to a record C$339 million. However, the growth rate was still dwarfed by June’s increase of 58.5%, according to a report compiled by New Cannabis Ventures’ Alan Brochstein.

Nonetheless, with Cannabis sales still growing significantly on a sequential basis, Tilray could continue to benefit, thereby boosting the bottom line. Analysts expect its earnings per share to improve by more than 36% this year before growing at an average annual rate of 40% over the next five years.

Source – TradingView

TLRY has room left to run after the rebound

Technically, Tilray shares seem to have recently bounced back to avoid slipping to the oversold conditions of the 14-day RSI. However, the stock is yet to reach the overbought conditions, leaving room for more upward movement.

Therefore, with Tilray shares still trading below the 100-day moving average in the intraday chart, investors could be moved to target profits at approximately $13.29 or higher at $14.92. 

On the other hand, if the trendline resistance in the descending channel formation hold firm, thereby triggering a pullback, the stock could find support at $10.20 or lower at $8.65.

Bottom line: Tilray seems to be turning a corner after the pullback

In summary, Tilray shares have plunged significantly since riding the social media chatter at the start of the year to trade at record highs. 

Therefore, with the company’s fundamentals improving significantly this year, the current pullback could be an opportunity to buy before the cannabis industry kicks into a higher gear.

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