DaveInCalgary wrote: Posted byu/MUNGilmore21
22 hours ago
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My analysis on Tilray using quantitative analysis to back up my assessments
Good DD
Overview:
I wanted to take this opportunity to inform you on the potentially life changing stock $TLRY. I want to make it clear, I am speaking of potential for the future, not a sharp rise in share price Monday at the opening bell. Patience will be the absolute key for Tilray and my reasoning will go in-depth further into this analysis. Current financials and the chart will not be discussed though what it can amount to and what I think will happen will be detailed.
Locations of Tilray:
Comparing the world map of annual marijuana prevalence with the map of Tilray’s subsidiaries is very exciting. Main subsidiaries include locations in Canada, Australia, New Zealand, Europe and Latin America (Tilray, 2021). With this in consideration, Tilray is tapping into five of the top ten countries in the world based on the annual cannabis prevalence list (T., 2019). This global presence in countries where marijuana usage is high was the first indicator that the company could scale heavily. Overall, Tilray has 11 office locations in 5 countries (U.S., Canada, Germany, Australia, Portugal) conveniently located where marijuana is extremely prevalent. With that said, it is easy to look past all the areas in which Tilray has connections. That list is (Tilray, 2021):
· Canada
· United States
· Portugal
· United Kingdom
· Ireland
· Switzerland
· Germany
· Czech Republic
· Cyprus
· Israel
· Peru
· Brazil
· Chile
· Argentina
· South Africa
· Australia
· New Zealand
These connections include export countries, clinical trials, pharmaceutical distributor supply agreements, Tilray licensed production facilities, High Park Licensed production facility, Manitoba Harvest facility and Manitoba Harvest products. Tilray was the first legal export of medical cannabis from North American to Australia and New Zealand which should be noted are two of the top five users of marijuana in the world. Tilray is still a leading provider of medical marijuana in Australia and New Zealand. For Canada, Tilray is a leader in scientific studies pertaining to medical marijuana and supplying tens of thousands of patients in every province with consistent products. Tilray was once against the first company to export medical marijuana from North America to Europe. Tilray has a cultivation license through the government of Portugal and produces for the EU products from Tilray are available at pharmacies across countries throughout the EU. Lastly, in Latin America which of course, Tilray produces for Chile. Tilray Latin American is attempting to strengthen the presence of Tilray in that region of the world (Tilray, 2021).
Management:
Though Irwin Simon gets some heat for his outrageous salary, it could be argued that is experience and expertise does warrant a massive salary. I am not writing this to express opinion but more to lay out facts. Mr. Simon has 30 years of experience and has been involved in other publicly traded companies (FREE & HAIN). At the time of Simon taking over HAIN had sales of nearly $50 million a year. From 1994-1997 HAIN “flourished under strong leadership” and 2 years after Mr. Simon took over sales were up to $68.6 million and upped the number of food products to 250 (the amount pre Mr. Simon was not listed). Simon was able to achieve this with only 43 employees and by the following year had added 71 new products. HAIN had partnerships with weight watchers, Growing Healthy Inc., ESTEE Corp and many other companies (fairly similar strategy with Tilray). With this success and the major acquisitions that had taken place, Mr. Simon won Entrepreneur of the year under Business week magazine. In 1999, the global giant Heinz made a $100 million dollar investment in HAIN taking a 19.5% stake. HAIN concluded fiscal year 2000, with sales of $404 million increasing sales 8x in 6 years (Reference for business, n.d.). He led Hain for more than 25 years and at its peak grew the company to $3 billion in net sales (Tilray, 2021). FREE was just founded in June of 2020 and is another global platform that focuses on natural alternatives, plant-based, clean label, non-sugar products. It is difficult to do a strong analysis of the history of the company being that it was founded during a pandemic and is only a year old. Something of note here is how long it took for Mr. Simon to grow the company from $50 million in sales to $3 billion. He took a very similar approach and was not afraid to spend money (sounding familiar yet?). Though there are other great leaders involved I think shifting focus on the medical side of Tilray can prove strength as well. Ms. Catherine Jacobson is the VP of global medical affairs and strategy. A PhD in neuroscience Ms. Jacobson is the face of Tilray to government regulators, physicians and pharmacists that Tilray is looking to partner with. Ms. Jacobson previously served as the Director of Clinical Research where the different areas globally that Tilray partners proves her competency (Tilray, 2021).
Tapping Into An Industry That Has Not Reach Its Inflection Point
It is incredible to consider that only two countries have COMPLETELY legalized the recreational use of marijuana for adults. With that, marijuana is the most used recreational drug around the world. Luckily the stigma around marijuana has begun to lighten up. I am sure we all have seen the old school marijuana commercials where people smoke and go crazy or some other bogus propganda, regardless this certainly is not the case anymore. Even in the early 2000’s we had the “flat girl” commercials.
Teen goes crazy: https://www.youtube.com/watch?v=DcW1GnWF0eM
Flat girl: https://www.youtube.com/watch?v=Rh8GbPnoqCI
Lets consider these two statistics, only two countries in the world have completely legalized marijuana and people, as a whole, are beginning to realize it is not what they thought I was in the 50’s and even in the 2000’s. Another key statistic that adds to this is that global marijuana use rose by 60% in the last decade with an uptrend every single year. On a global scale, more people are smoking marijuana than ever. Almost 200 million people smoke marijuana worldwide and that number continues to grow (DW.com, 2020). Lets breakdown everything I have mentioned here. People are beginning to accept marijuana + only two countries have completely legalized marijuana + more people globally are smoking marijuana. Assuming these trends continue, we will have more acceptance for weed globally, more people smoking weed and more countries legalizing weed. This shows me the market has not been tapped yet. Lets take a look at projections. The global cannabis market as of 2020 has an estimated value at $20.5 billion and is projected to reach $90.4 billion in 2026. Tilray has a global presence of a market that has projected growth of $60 billion in 6 years (ResearchAndMarkets, 2021). Not only is the presence globally but Tilray is in five of the top ten countries (Tilray, 2021).
The Focus On Medicinal Marijuana:
The focus on medical marijuana could be a make or break for a significant portion of these companies. Tilray is among only a few of the large marijuana companies that is focused on evidence-back medicinal marijuana. In 2019, Tilray successfully important medical marijuana into the United States from Canada to support a new clinical trial. The trial was to test the efficacy of medical marijuana in treating breast cancer. CEO Mr. Simon talked about 10 clinical trials announced and numerous distributor relationships to supply the marijuana for these trials. Tilray’s CC pharma subsidiary already provides marijuana to 13,000 pharmacies and as I mentioned does have a certified cultivation and production facility in Portugal (Humayun, 2021). The base for Tilray’s pipeline to medicinal marijuana is very strong. This goes back to how examined the prevalence and stigma behind marijuana. Tilray already has a strong base and assuming the uptrend continues, large profits are to be made. Tracking the history of Mr. Simon, acquisitions are a strong part of his strategy. Mr. Simon has indicated Tilray is looking for potential target acquisitions for the medical business likely boosting Tilray’s presence in this potentially, very strong industry.
What Are Institutions Doing:
I did not want to dive very deep into the actual trading of this stock because I see this much as much more of an investment. The type of stock to buy then not think of for 5 years. With that though, institutional ownership has increased significantly from December of 2020 with 40 million shares owned by institutions to June of 2021 rising to 67 million shares. The total numbers include 445 total, 419 long only, 4 short only, 22 long/short. Tilray is a heavily short stock and gets beat down fairly good by Citadel And Susquehanna. Both of which have began take large short positions in Tilray and who can forget what happened in February in 2021? A short squeeze here is possible. Institutional shorts will generally reduce their short positions prior to filling then increase their short positions to try to fly under the radar so things like GME do not happen again. This can make the stock more vulnerable to short squeeze. I want to reiterate that this is far from a short trade and certainly more of a long-term investment but the possibility for a short squeeze should always be mentioned. Please see this post where I do not feel the need to totally reiterate the scumbags that this hedgies are but it is fairly clear what they are doing to Tilray.
Global Legality Statistics:
The increasing number of countries legalizing the use of marijuana regardless of whether or not it is for recreational or medical use will be an obvious plus to Tilray. It is hard to say which countries will take this step though Mexico, Israel, Italy, South Africa, Belize and the Netherlands have all become likely candidates due to recent legislation. Israel has stated that legal marijuana will come as quickly as nine months and others on this list have started a pilot program lasting four years. What does this mean to Tilray? Looking at Mr. Simons track record shows he is acquisition heavy and the more countries that give marijuana full legality, the more areas in which Mr. Simon will pursue. I could really go in depth about this topic though the main thing to takeaway is the global uptrend in loosening up the marijuana laws.
Other Marijuana Facts That Prove Growth And Acceptance: Copy and pasted from here
Financial And Growth Statistics:
Legalizing cannabis would generate $8.7 billion in federal and state tax revenue annually.
The overall cannabis industry spend in Canada is projected to rise by 58% in the coming years.
In 2018, California was the leading state in terms of total cannabis sales, with $5.6 billion.
Similarly, in Canada, the average price of illegal cannabis is $8.24 per gram. When sold via the legal channels, the same amount goes for $8.98.
Furthermore, in 2017, marijuana users in North America spent nearly $9 billion on legal cannabis.
Moreover, 91% of infused product companies claim that they at least break even and make profits.
In addition, the legal cannabis trade in the United States (See link for MedMen majority position) grew by 37% to reach $9.5 in net worth.
According to WHO, approximately 147 million people or 2.5% of the total global population consume marijuana.
This number is bigger, according to Statista, which reports that there were more than 219 million marijuana users in the world in 2017.
Also, in 2016, 24 million US citizens or 8.9% of the total population were current cannabis users.
Similarly, in 2018, 123,935 million US citizens had used marijuana in their lifetime, which is a significant increase from 104,950 million in 2009.
Moreover, in 2018, over 11.8 million young adults in the US said they had used marijuana in the past year.
In 2018, the total sales of legalized recreational marijuana amounted to $4.4 billion.
Also, as of 2018, the total sales of recreational marijuana in the US reached $11.67 trillion.
The recreational marijuana market in the US is valued at $3.2 billion.
Below Give Economic Reasoning For Legality:
Marijuana job openings increased by 76% year-over-year in December 2018.
As a result, in the US alone, there were 1,512 job openings in the marijuana industry in December 2018.
Besides, 53% of marijuana jobs are for technical and professional workers.
Interestingly, at $58,511, marijuana jobs pay well above the median US salary.
Marijuana By Region:
According to the UNODC data, Oceania (New Zealand and Australia) leads the way in terms of the prevalence of cannabis at 10.9%. America comes second at 8.4%, followed closely by Africa (6.4%), Europe (5.4%), and Asia (1.8%). (UNODC data)
Besides, there are eleven states with legal recreational marijuana including Alaska, California, Colorado, District of Columbia, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington
Marijuana For Medicinal Purposes:
83% of US citizens support the use of medical marijuana among cancer patients.
Besides, 93% of cancer patients reported that medical marijuana helped manage their conditions or related symptoms.
Also, 62% of cancer patients in the US are open to using medical marijuana to manage their cancer nausea, pain, or other symptoms.
In addition, 63% of cancer patients believe the benefits of medical marijuana outweigh the risks.
As of 2018, 13% of cancer patients, 4% of cancer patients’ family members, and 8% of caregivers have used medical marijuana to manage symptoms in the last 12 months.
Interestingly, 48% of cancer patients using medical marijuana had difficulty accessing it in 2018.
Moreover, approximately 45.9% of medical oncologists have recommended medical marijuana for cancer-related issues.
Besides, 34.3% of oncologists believe that medical marijuana is equal or more effective in managing cancer pain than standard treatments.
Conclusion:
I could do several more pages on why I think Tilray will be a potential millionaire-maker stock. This is my attempt to use quantitative data to prove my assessments. The key takeaways are:
· Tilray has a global presence in an industry that is nowhere near peaking
· Mr. Simon has proven success with HAIN multiplying the company revenue by 8x in six years
· Marijuana is becoming increasingly more accepted on a global scale
· Tilray has a strong desire to have their hands in medical marijuana and already supplies over 13,000 pharmacies
TLDR:
I assess that Tilray could be a strong long term hold based on a worldwide presence in a non-peaked field.
P.S.:
I did not proof read this before posting. I got banned from WSB after posting this same analysis before $OCGN blew up and I still don’t know why. This is not really their type of post but if anyone wants to share it there, I do not mind. Happy reading everyone.
Thanks everyone!
References
(2020). Retrieved from DW.com: https://www.dw.com/en/global-marijuana-use-rose-by-60-percent-over-the-past-decade/a-49358921
Humayun, F. (2021). For Patient Investors, Tilray Will Deliver Multi-Fold Returns.
Reference for business. (n.d.). Retrieved from https://www.referenceforbusiness.com/history2/15/The-Hain-Celestial-Group-Inc.html
ResearchAndMarkets. (2021). Global Cannabis Market by Application .
T., G. (2019). Retrieved from DelphiHealthGroup.com: https://delphihealthgroup.com/marijuana/marijuana-global-use-statistics/
Tilray. (2021). Retrieved from Tilray.com: https://www.tilray.com/facility
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