12 Feb 2021 BY MICHAEL BERGER
2021 has already proven to be a very active year for Tilray Inc. (TLRY) and we are not even halfway through February.
So far this year, Tilray has rallied more than 100% and has been a top performing cannabis stock. Although the market became conditioned to Tilray’s volatile price swings in 2018 (when the stock price traded as high as $300), the recent trend has been supported by substantial developments and we believe our readers need to be aware of this.
At current levels, Tilray is trading at very overbought levels and momentum has shown no signs of slowing down. Going forward, we believe the market is highly focused on Tilray’s expansion in the European Union (EU) and the merger with Aphria, Inc. (APHA.TO) (APHA). We consider these primary themes to be the most important aspects of the story and want to provide an update on the recent developments.
A Global Execution Story to be Aware of
During the last month, Tilray has reported several major advancements in the EU cannabis market and this is an opportunity that we have been bullish on for several years. The primary reason for our positive view on the EU cannabis industry is related to the profit margins that are associated with the sale of it. When compared to North America, the EU’s cannabis market is much less saturated, and we consider this to be a key pillar of our long-term investment thesis.
Earlier this week, Tilray reported to have entered into an agreement with Grow Pharma to import and distribute branded medical cannabis products into the United Kingdom (UK). By March, the company expects to have a range of Good Manufacturing Processes (GMP) certified, medical cannabis products available for patients and are bullish on the long-term value that is associated with the UK market.
As demand for medical cannabis continues to increase in the UK, Tilray is positioned to capitalize on the trend and is executing on a strategy to become leading global medical cannabis products supplier. The regulatory trend in the EU is progressive and there has been a steady increase in the number of markets that have legalized medical cannabis.
Tilray has Been Ahead of the Curve with the EU Cannabis Market
We believe that Tilray has been ahead of the curve with the EU cannabis market and expect the acquisition of Aphria to serve as a substantial growth catalyst. The combined company will be levered to some of the attractive verticals of the cannabis value chain in the EU and we are bullish on the amount of synergies that can be found between Aphria and Tilray.
Once the merger agreement is approved, Canopy Growth Corporation (WEED.TO) (CGC) will be facing a formidable opponent and we believe that Aphria and Tilray have better exposure to burgeoning international cannabis markets. We believe that competition in the cannabis industry is heating up and expect to see more consolidation in 2021 and beyond.
Companies like HEXO Corporation (HEXO.TO) (HEXO) and Aurora Cannabis Inc. (ACB.TO) (ACB) could prove to be acquisition targets for companies like Canopy Growth or Cronos Group (CRON.TO) (CRON) and this is a trend to be aware of.
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