Tilray Stock Flying on Reddit Day Trader’s Hunt

Tilray (NASDAQ: TLRY) stock price grew 50% in a single trading session as Reddit day traders have moved attention towards cannabis stocks and targeting the hot Canadian cannabis producer Tilray over the past few days.

WallStreetBets forum members believe Tilray and Aphria (NASDAQ: APHA) have more upside potential despite recent gains. Both companies are speculated to merge in the near future.

Tilray

Moreover, the share price gains are also supported by improving fundamentals for the cannabis industry. Joe Biden and other Democrats are seeking to legalize the cannabis industry at a federal level in the near future. Moreover, prospects for new investments have been enhancing retail investor’s sentiments.

Over the next six months, there’s an expectation of more capital coming into the industry because it will now be investable to institutional players, and institutional bankers will help bring more capital into the industry,” Tim Seymour, the founder, and chief investment officer of Seymour Asset Management, said.

Tilray Stock Rally is Backed by Fundamentals

Tilray stock is up 440% since the beginning of this year, but the rally is not only fueled by Reddit day traders. Indeed, shares of Tilray have also been backed by its growth strategies.

For instance, Tilray and Grow Pharma formed an agreement to import and distribute their medical cannabis products into the U.K, with expectations that Tilray will have a range of GMP-certified, medical cannabis products available for patients in the U.K. by March 2021.

Moreover, expectations are high over the merger between the two largest cannabis players. Cantor Fitzgerald raised its price target for Tilray amid a merger with Aphria.

We have taken the mid-point of 30-40x our CY22 EBITDA estimate to value the cannabis business of the new company. We note that other Canadian LPs do not work as EBITDA comps as they are still EBITDA negative; but we think 30-40x CY22E EBITDA is reasonable given landlocked US MSOs (with margins that may not be sustainable) trade at 20x. Our PT implies 13x our 2022 sales estimate for the combined company (17x on 2021), which is not unreasonable, in our view.”

Siraj Sarwar - Lead Analyst
@tradethedayfx
Siraj Sarwar has been performing analysis on the stock market, equity research and general business consultation. He regularly contributes articles on economics, commodities, and equities to the world's leading websites, including Trade the Day, SeekingAlpha, TheStreet, and MSN.
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