Cannabis companies’ prospects have improved significantly this year, owing to the optimism surrounding the likelihood of large-scale cannabis legalization at the federal level and widespread support for it in several states across the nation. Indeed, the global cannabis market is expected to hit $118.9 billion in 2027, growing at a 28.5% CAGR from 2021.
As state-level cannabis legalization has gained significant traction, several multi-state operators have been able to capture these new markets and grow their sales significantly. With many cannabis operators now investing substantially to develop tech-enabled delivery solutions for adult-use cannabis, their markets are expected to continue growing.
Tilray, Inc. (TLRY) and Organigram Holdings Inc. (OGI) have been the best performing cannabis stocks in the first half of the year, capitalizing on industry tailwinds. So, we think it could be worth adding these stocks to one’s watchlist.
Click here to check out our Cannabis Industry Report for 2021
Tilray, Inc. (TLRY)
TLRY specializes in medicinal cannabis and cannabinoids research, cultivation, manufacturing, and distribution. The company offers a variety of products that include hemp-based meals and alcoholic drinks, as well as cannabis lifestyle and consumer packaged products. It offers its cannabis products to patients, physicians, pharmacies, hospitals, governments, and researchers. TLRY is based in Nanaimo, Canada.
Last month, TLRY had announced a new product partnership between SweetWater Brewing Company and Broken Coast Cannabis Ltd., a TLRY portfolio brand. Broken Coast BC Lager1 will be TLRY's first Canadian cannabis brand launch into the United States. This should help the company expand its brand portfolio and increase its global footprint.
TLRY's gross profit increased 24.2% year-over-year to $13.50 million in the first quarter ended March 31, 2021. Its cash and cash equivalents increased 139.3% year-over-year to $416.37 million. Also, the company’s cannabis segment reported a 2% year-over-year increase in revenue to $31.39 million for this period.
Analysts expect TLRY’s EPS to surge 81.7% next year. Its revenue is estimated to increase 53.3% year-over-year to $862.25 million in its fiscal year 2022. The stock has gained 114.4% over the past year and 96.7% year-to-date.
Of nine Wall Street analysts that have provided ratings for the stock, five have rated it Buy. Closing yesterday’s trading session at $16.25, the $20.69 consensus price target indicates a potential 27.3% upside.
Organigram Holdings Inc. (OGI)
Headquartered in Moncton, Canada, OGI is a licensed cannabis and extract-based product manufacturer. The company's primary goal is to produce indoor-grown cannabis for Canadian patients and adult recreational users. Organigram has the legal right to possess, cultivate, sell, provide, ship, distribute, and transport cannabis, cannabis plants, and cannabis oil.
Last month, OGI announced that it has filed a preliminary short form base shelf prospectus with each province and territory's securities regulator in Canada. This will allow the company to qualify the distribution of up to CAD500 million ($398.81 million) of common shares, preferred shares, debt instruments, subscription receipts, warrants, and units.
During its fiscal second quarter, ended February 28, 2021, OGI's operating expenses declined 21.1% year-over-year to CAD12.08 million ($9.64 million). It’s financing expenses declined 59.3% to CAD800,000 ($641,282) over this period. The company’s cash and cash equivalents increased 48.8% from the year-ago value to CAD61.12 million ($48.99 million).
The company's EPS is expected to grow 45.9% in the current year. Analysts expect OGI's revenue to increase 56.4% from its year-ago value to $93.10 million in its fiscal year 2022. OGI's stock has gained 70.8% over the past year. Also, the stock has surged 97.7% year-to-date.
Of the seven Wall Street analysts that have rated the stock, two have rated it Buy and five have rated it hold. A $3.49 consensus price target represents a 32.7% potential gain from its last closing price of $2.63.
Click here to check out our Cannabis Industry Report for 2021
TLRY shares were trading at $16.04 per share on Friday morning, down $0.21 (-1.29%). Year-to-date, TLRY has gained 94.19%, versus a 16.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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