Amidst all the earnings that came out yesterday, one small cap stock sitting at a whopping $2.06 per share is flying higher than the cannabis products it sells this morning. 

(Source: Giphy) 

Yesterday, shares of Tilray Brands (NASDAQ:TLRY) popped north of 8% post market after clinching an impressive (and rare) earnings beat that hotboxed all of Wall Street’s estimates. 

(Source: Yahoo Finance) 

According to the earnings call, the company posted revenues of $229.90 million, up 26% year-over-year, beating Wall Street’s expectations of $226 million. Adjusted earnings came in at $0.04 per share, a pleasant surprise against the anticipated loss of $0.02 per share. Not too shabby, right? 

(Source: Giphy) 

However, the real shocker from the report came from Tilray’s beverage-alcohol division. After last year’s acquisition of several Anheuser-Busch brands, it’s clear Tilray isn’t just about the mary jane anymore as this new alcohol division saw revenues skyrocket 127% to $76.70 million with gross profit shooting up 146% to $40.80 million as well. 

(Source: Market Watch) 

For both investors and Tilray, this is massive, because the initial acquisitions were quite the gambling bet for the company. However, with these new numbers this decision seems to be paying off like a loose slot machine in Vegas.  

(Source: Giphy) 

CEO Irwin Simon is pretty pumped about the company’s direction. He’s touting Tilray as a “global lifestyle consumer packaged goods company” rather than just a cannabis player. With beverage-alcohol sales booming and a 13% increase in cannabis revenue, the company is showing signs of life. Translation: “We’re not just stoners anymore, Mom!” 

(Source: Cannabis Ventures) 

On top of that, Tilray has been working hard to clean up its balance sheet. They’ve reduced net convertible debt by about $300 million and surpassed their cost-savings goals. Adjusted EBITDA increased 37% year-over-year to $29.5 million. This no doubt was the main driver in investor optimism after hours, as shares popped +8%...

(Source: Giphy) 

But with that said, not everything is rosy in Tilray land. The company’s distribution revenue fell to $65.6 million, a noticeable drop as the stock has been diluted more times than the punch at a frat party. Due to the growing debt, Tilray has been issuing quite a bit of shares to pay down debt and fund further acquisitions. 

(Source: Giphy) 

As of right now they’ve managed to pay down their debt from $177 million to $61 million, but still, at what cost?  The company’s reliance on stock issuance is a double-edged sword that’s come at the cost for current shareholder value. So In order to get to a net cash positive position, Tilray will either need to raise more money through share offerings or negotiate with bondholders to convert debt to equity. Either way, expect more dilution ahead. 

(Source: Giphy) 

But in light of where Tilray stands after their impressive Q4 numbers, here’s the million-dollar question of the day: Can Tilray keep up this momentum? Or will the stock fatigue throughout today’s trading session? 

Well as we can see, the company’s pivot to include beverage-alcohol is a smart move, especially as the cannabis market remains volatile. But let’s not forget, the core cannabis business still faces significant challenges.

(Source: Seeking Alpha) 

Tilray’s forecast for FY25 includes revenues of $950 million to $1 billion, with mid-single-digit organic growth. That’s not exactly setting the world on fire. And with Germany’s cannabis market opening up, there’s some potential for growth, but still waiting on that is about as exciting as watching paint dry. 

(Source: Giphy) 

In the end, Tilray’s latest earnings report is a mixed bag. They’ve shown impressive growth in their new beverage-alcohol segment and made strides in reducing debt. But the ongoing dilution and mixed performance in other segments are red flags.

Which is why If you’re thinking about jumping on the Tilray bandwagon, tread carefully. The stock still trades at 17x adjusted EBITDA, which is pricey given their history of not hitting financial targets (see: Paying top shelf prices for mid-grade weed.)

(Source: Giphy) 

So until we see consistent, profitable growth, it might be wise to hold off on popping the champagne.Now only time will tell if Tilray will continue its uptrend progress, but for now, keep your eyes peeled on this stock. With a current dirt cheap price of $2.06 and already up +12.30% at market open, this stock has plenty of room to run if it wants to. Until next time friends…

Stocks.News doesn't hold positions in any companies mentioned in the article.