TLRY’s Soaring Stock Price: Fundamentals Still Playing Catch-Up

$Tilray Inc.(TLRY)$

Performance Overview and Market Feedback

Tilray Brands has staged a remarkable short-term rebound despite a challenging year overall. While the stock is down nearly 60% year-to-date, its recent momentum has been extraordinary—posting a gain of more than 100% in the past month alone. The latest single-day rally of almost 18% underscores the renewed speculative interest from retail traders and opportunistic institutional investors.

The sharp rebound has been driven largely by sentiment rather than a fundamental shift in profitability, with traders betting on a favorable regulatory environment in the U.S. and potential cannabis rescheduling. Positive reaction to Tilray’s earnings beat on EPS and EBITDA—despite headline revenue weakness—has reinforced the idea that the company is stabilizing operationally.

Market chatter indicates growing interest in Tilray’s beverage strategy, as it becomes one of the largest U.S. craft brewers by volume. This diversification is increasingly being viewed as both a hedge against cannabis market volatility and a strategic pathway to brand strength across regulated markets. However, skepticism remains high, with some analysts warning that the rally may have overshot near-term fundamentals.

Current Fundamentals and Cash Flow

From a fundamental perspective, Tilray remains in a transitional phase. Revenue for FY2024 was $789 million, but profitability continues to be hampered by high operating costs and recent impairment charges. The cannabis segment’s gross margin has improved to 41%, the highest in two years, reflecting better cost control and operational efficiencies. Beverage margins have also seen incremental gains, aided by scale advantages in distribution and brand consolidation.

Cash flow remains a structural weakness. Tilray reported a trailing twelve-month free cash flow of –$127.5 million, with quarterly free cash flow still negative at –$19.1 million. The company’s heavy capital requirements for production, distribution, and marketing—particularly in expanding its beverage portfolio—have kept it from generating sustainable positive cash flows.

While EBITDA guidance of $67 million for FY2026 suggests progress toward operational stability, the absence of consistent free cash flow means Tilray must either rely on equity raises, debt financing, or further asset optimization to support growth initiatives. Management’s ability to translate revenue diversification into genuine cash generation will be the key determinant of its valuation trajectory over the next 12–18 months.

1. Earnings Breakdown & Guidance

In Q4 CY2025, Tilray delivered an EPS of $0.02, a sharp beat over the consensus of –$0.02, marking a 200% positive surprise. However, revenue fell 9.1% short of forecasts, coming in at $224.5 million.

In Q2 FY2025, revenue was $224.5 million, down 2.3% year-over-year and slightly below the $229.2 million estimate. GAAP EPS came in at –$1.30, primarily due to a $1.4 billion one-time impairment, missing estimates of –$0.03. Adjusted EBITDA of $27.6 million surpassed expectations, while EBITDA guidance for FY2026 stands at $67 million, slightly below analyst forecasts of $71.8 million.

Guidance remains modest, reflecting management’s cautious outlook amid ongoing restructuring and impairment impacts.

2. Market Sentiment & Performance Overview

Investor sentiment is mixed. The quarter saw a win on EBITDA but a massive one-off impairment created lingering uncertainty.

Performance metrics:

• Year-to-date 2025, TLRY shares are down approximately 59.4%, significantly underperforming cannabis ETFs.

• Over the past month, shares surged more than 105%, sharply outperforming the S&P 500’s ~5.9% gain.

• On the most recent trading day, TLRY rallied 17.9%, fueled by excitement over acquisitions, international expansion, and speculation of regulatory easing under the new administration.

The market’s reaction indicates speculative capital flowing into cannabis-related names amid shifting macro and policy conditions.

3. Fundamental Analysis

Financial Overview:

• FY2024 revenue: $789 million; Net Loss: –$222 million.

• Free Cash Flow (TTM through May 2025): –$127.5 million, with quarterly FCF at –$19.1 million.

• Earnings have contracted at –29.2% annually on average, while revenue has grown at +13.3% per annum.

Margins:

• Cannabis gross margin improved to 41%, up from 33%, the highest in two years.

• Beverage margins also showed improvement, benefiting from economies of scale.

Strategic Positioning: Tilray has diversified into craft beer and THC-infused drinks, owning 18 beverage brands and ranking as the fifth-largest U.S. craft brewer by volume. This provides a non-cannabis revenue stream and a broader retail distribution network.

4. Technical Analysis

Tilray’s stock has shown extreme volatility, with intraday swings ranging from $0.90 to $1.19 in recent sessions. The recent upward breakout reflects speculative enthusiasm, but resistance levels remain near the $1.25–$1.30 zone. Support levels are clustered around $0.85–$0.90.

5. Why the Stock Has Rocketed

Several catalysts have driven the recent surge:

1. Earnings and EBITDA beats despite headline GAAP losses.

2. Margin improvements across cannabis and beverage segments.

3. Regulatory optimism around cannabis rescheduling and U.S. market liberalization.

4. Strategic pivot toward high-margin beverages and brand consolidation.

5. Short covering after an extended period of underperformance.

6. DCF Sensitivity Analysis

Valuation models present wide-ranging outcomes:

Interpretation: Short-term FCF metrics indicate risk of overvaluation, while long-term growth models point to substantial upside—highlighting the highly speculative nature of TLRY’s investment case.

7. Valuation Commentary & Investment Takeaways

• Relative Valuation: Price-to-Sales ratio of ~1.3× vs. cannabis sector average of ~7× indicates possible undervaluation relative to peers.

• Balance of Risk & Reward: Upside potential rests heavily on successful beverage integration and margin expansion. Negative FCF and recurring net losses remain headwinds.

• Catalysts to Monitor:

  U.S. cannabis regulatory developments.

  Quarterly margin trends and EBITDA delivery.

  Brand monetization through beverage channels.

8. Verdict & Entry Price Zone

Verdict: Speculative Buy for aggressive, risk-tolerant investors. The turnaround hinges on execution in beverages and regulatory catalysts.

Entry Price Zone: $0.90–$1.00 for initial positions, with opportunistic adds below $0.80 during pullbacks.

Final Takeaways

Tilray’s recent rally reflects a blend of operational improvements, regulatory speculation, and speculative capital inflows. The stock remains volatile and high-risk, with fundamentals yet to catch up to the market’s forward-looking optimism. For investors willing to stomach short-term volatility in exchange for potentially outsized gains, TLRY offers a high-beta play on the cannabis sector’s evolving narrative.