Why Tilray Brands Investors Shouldn't Expect the Company to Post a Profit Anytime Soon
Key Points
Tilray has been acquiring beverage brands in recent years, and that continues to be part of its growth strategy.
The business has become bigger, but its margins remain fairly low.
The stock has lost 97% of its value in the past five years.
In recent years, as the growth has stalled in the cannabis industry, marijuana producers have been trying to focus more on improving their bottom lines, in a way to win over investors. But that hasn't been easy in an ultra-competitive environment where there's significant pressure on price.
Tilray Brands (NASDAQ: TLRY) has been trying to strengthen its business through diversification. It's been acquiring craft beer brands as it looks to become much less dependent on just the cannabis industry. While that has allowed it to get bigger and generate a much stronger top line, here's why investors shouldn't expect the company to turn a profit anytime soon, and what that might mean for the stock.
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Margins are thin, costs are high, and management is still on the hunt for more growth opportunities
Tilray recently posted its third-quarter results for Fiscal 2026, covering the period up to Feb. 28. Its net revenue rose 11% to $206.7 million, but it still incurred an operating loss of $26.4 million. At first glance, that looks to be a huge improvement from the $759.9 million operating loss it incurred in the prior-year period. However, that also included a massive impairment charge, which totaled $699.2 million. While there was an improvement on the bottom line, it wasn't arguably all that significant after factoring out non-recurring items.
Even though Tilray has diversified into alcohol, its margins aren't all that high, either. Last quarter, its gross profit was just under $55 million, which was 27% of its top line. Its general and administrative costs alone were more than $50.2 million. Add on another $10.6 million in selling expenses, and the business is already in the red without factoring in amortization, marketing and promotion, plus other expenses.
There are also no signs that the business appears to be slowing down in its expansion efforts, which could lead to greater expenses in the future. CEO Irwin D. Simon says that Tilray is "accelerating the buildout of a scaled global beverage platform."
What a lack of profitability may mean for the stock
In five years, Tilray's stock has lost 97% of its value. Expanding into alcohol hasn't made investors more bullish on the stock. While the company can boast and say that its business is getting bigger, it's not as easy to make the case that it's a more investable company today. Its growth remains largely contingent on acquisitions these days, which doesn't make for an exciting growth stock.
With there being no compelling reason to invest in Tilray's stock these days, I would expect its value to continue to go lower in the future. This is largely a speculative stock to own, and you're likely better off avoiding it, at least until there's solid proof to suggest that its business is on a much stronger path forward.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.