Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for Tilray Brands
- Fair Value Estimate: C$2.40
- Morningstar Rating: ★★★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Very High
Tilray TLRY reported fiscal third-quarter 2025 earnings, with net revenue declining 1% year over year to $186 million. However, excluding the effect of currency, net revenue would have grown 2%. Adjusted EBITDA margins declined about 60 basis points to 4.8%.
Why it matters: Given that Tilray remains in a growth stage, increasing sales is important for achieving scale, expanding profit margins, and reaching consistent positive free cash flow. Headwinds in cannabis and beverages are likely to weigh on top-line growth.
- With the Canadian cannabis market still challenging, Tilray has directed volume internationally and exited lower-profit categories. This helps near-term margins but sacrifices potential growth. Meanwhile, its beverage alcohol business faces challenges from the declining popularity of craft beer.
- Hemp-derived THC beverages have been gaining popularity in the United States. Despite a nascent but growing presence, we’re skeptical of whether Tilray can capture a major share, given the exploding competition due to hemp’s nationally legal status.
The bottom line: We expect to reduce our C$2.40 per share fair value estimate for no-moat Tilray by a high-single-digit percentage on a weaker Canadian outlook.
- Tilray lowered full-year guidance for net revenue to $850 million-$900 million from $950 million–$1 billion. Although our pre-earnings call forecast of $864 million predicted the downgrade, we expect revenue weakness to linger for the next few years.
- Despite our expected cut, shares look undervalued. However, we’d reiterate our Very High Uncertainty Rating and remind investors that cannabis is still a young and volatile industry, leading to dramatic potential valuation outcomes.
Big picture: Tilray should have minimal exposure to escalating tariffs despite operating in Canada, the US, and Europe. Most products are produced within the countries and/or regions where they are sold, limiting risk to aluminum for beverage packaging.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
