In a recently released analyst research report, Northland Securities, Inc.‘s Senior Research Analyst, Michael Grondahl, just assigned a hold rating on shares of international cannabis giant Tilray Inc. (NASDAQ:TLRY). While many other analysts covering Tilray came away from the company’s recent earnings release with renewed bullishness, Grondahl is still on the fence in some ways.
Why Grondahl Rated TLRY a Hold
Based on Mike Grondahl’s questions on Tilray’s most recent earnings call, there are still uncertainties as to how Tiraly will realize its full potential in the CBD space as well as abroad in places like Germany and beyond.
First, Grondahl asked Brendan Kennedy about progress in Germany and the international space:
“Hey, Brendan, I know you kind of called out Germany but what other countries do you think are most promising for medical use in the near term?”
Kennedy responded, saying:
“Oh, gosh. We’re — so, I’ll sort of bifurcate that into existing and then future. So, the UK, Australia, New Zealand, we continue to see growth there. Really Chile, Argentina, Peru, Brazil are really early on in their growth curve. And then, in Europe, Czech Republic, Croatia, Cyprus are all countries that we already ship to. I think that we’ll see progress and really interesting opportunities inside of the EU, really by the end of this year. And so, whether that’s Ireland, Poland, France,et cetera, those are the opportunities that we think are going to come on line. There’s 19 countries in Europe that have legalized medical cannabis. And so, we expect that a population of more than 500 million people will have access to medical cannabis in Europe over the next 12 to 24 months. And I think really an important distinction to make between Canada and Europe is that in Canada, the Government of Canada is taxing medical cannabis. And in Germany, they’re subsidizing medical cannabis. In Germany and the rest of Europe, you’re going to see this product made available through government subsidized medical programs. And so, it’s a really different approach from Canada. That’s — sometimes it’s hard for people to grasp. In Germany, any doctor can write prescriptions, any patient for any illness distributed through a pharmacy with insurance company coverage. And you just don’t see that in North America today.”
Then, regarding the company’s operations and opportunities in the CBD space, Grondahl asked the last and final question of the Tilray Q4 2018 earnings call:
“Is there any form factors that you think really stick out with hyper demand or is it just anything with CBD can sell like crazy? How do you think about it?”
Seemingly off the cuff, Kennedy responded:
“That’s what’s interesting about what we saw a few weeks ago at Expo West. We had a pretty large team there from Tilray, almost our entirety U.S. team was there, as well as the team from Manitoba Harvest. And everyone on the team was sending me — they were all sending me pictures of different CBD products produced by really mainstream manufacturers. And it was — I mean, it was across — it ran the gamut in terms of form factors. And I think, I made a joke the final day that the only thing I didn’t see was the CBD toothpaste. And two people sent me a CBD toothpaste. And so, we’re — sent me a picture of the CBD toothpaste. So, we’re seeing it in virtually every form — imaginable form factor. I think that — I think what you’re going to see are products, mainstream products that contain CBD. But, then, you’re also going to see really pharmaceutical grade, dietary supplement, nutritional supplement products that come from established brands and trusted, trusted sources. And I think that’s probably the biggest opportunity.”
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