It’s been nearly three months since I last wrote about Tilray (NASDAQ:TLRY). In a year like 2020, that’s an eternity. In late February, TLRY stock was flying above $20.

The mid-March correction knocked Tilray down to a 52-week low of $2.43, losing 75% of its value along the way.

Since then, Tilray stock has been rangebound between $5 and $10. As I write this, TLRY is down 2% on the day in early trading, hovering around $5.50.

At this point, is there any hope for Tilray and Tilray stock?

The answer depends on whether you see the glass half full or half empty. I see it half full, but why don’t we look at both sides of the argument.

Tilray Stock Can Revisit $20

It almost seems surreal asking if Tilray can get back to $20 when it was trading for seven times that amount nearly two years ago to the day. It’s like cannabis investors in general, and Tilray shareholders specifically, have been caught in a nightmare they can’t wake up from.

If only that were the case.

In my June article, I stated that I could see Tilray “being one of two to four companies that rule the global cannabis market in a decade.” Before I argue if I think it can revisit $20, I better make sure nothing’s changed in the past three months to alter its business trajectory.

Let’s see what my InvestorPlace colleagues have been writing about Tilray recently.

On August 10, William White broke down Tilray’s second-quarter results. Analysts expected a 27-cent loss. Tilray delivered a 65-cent loss. On the top line, Tilray had $50.4 million in revenue, well below the consensus estimate of $55.0 million.

Ouch. A double miss. See what happens when you stay away for three months? All hell breaks loose. Tilray stock dropped more than 10% on the news. TLRY needs some good news and fast.

InvestorPlace’s Joel Baglole mentioned in his August piece about marijuana stocks to buy that Tilray managed to grow its international medical revenue in the second quarter by 349% to $8.3 million.

Looking at the Q2 2020 press release, if you remove bulk sales from the quarterly results, cannabis revenues in the second quarter grew 54.9% to $29.8 million from $19.2 million a year earlier. That means it saw increases across International Medical, Canadian Medical and Adult-Use sales.

Further, the average net cost per gram in the quarter was $3.42, excluding a one-time transaction, while the average net selling price per gram was $5.03, excluding the same one-time transaction. That’s a profit spread of $1.61 per gram, and there’s nothing half empty about those numbers.

“With our significant cost cutting and balance sheet actions behind us, we have positioned Tilray to enter the second half of 2020 in a stronger position so we can remain focused on achieving profitable growth in all our markets and deliver break-even or positive Adjusted EBITDA in the fourth quarter of 2020,” said Brendan Kennedy, Tilray’s Chief Executive Officer.

Consider that in the second quarter, the company lowered its adjusted EBITDA loss by 32% to $12.3 million. In my opinion, Tilray is heading in the right direction.

Tilray’s Likely to Remain Below $10 for A While 

InvestorPlace’s Matt McCall likes cannabis stocks. Just one named Tilray.

“But the growth isn’t good enough, for two reasons. First, it’s not fast enough. Revenue increased just 10% year-over-year in this year’s second quarter. That’s one of the slower rates among the major Canadian players,” McCall wrote on September 11.

“On its own, that slow growth wouldn’t necessarily be a problem — if it was the right kind of growth. It’s not. Pricing remains relatively soft. As a result, gross margins, which are a problem I tagged earlier this year, continue to weaken.”

But did they?

On the surface, Q2 2020 gross margins, excluding inventory valuation adjustments, were 26%, 100 basis points less than a year earlier. However, if you exclude the one-time bulk shipment, the spread of $1.61 per gram was 86 cents higher than a year earlier (based on a net selling price per gram of $4.61 and average net cost per gram of $3.86).

From where I sit, Tilray’s gross margins aren’t nearly as bad as McCall makes them out to be. Could they be better? Absolutely. And I confident Brendan Kennedy would tell you the same. 

I do agree with McCall that Tilray’s debt is high. Shareholders are better to be diluted than sunk. If selling $250 million of its stock strengthens the balance sheet, I say do it. 

McCall believes that Tilray doesn’t do anything well. I don’t see it this way. I guess we’ll find out soon enough if that’s true. 

The Bottom Line

Brendan Kennedy believes Tilray can be at breakeven adjusted EBITDA by the fourth quarter. If it does it, I could see TLRY above $10 in a blink of an eye. 

Do I think it has a shot at getting back to $20? I do, but it has to walk before it runs. Maybe in 2022.

When it was trading at $8 in June, I said that it was a good buy for aggressive investors.

Now that it’s closer to $5, I think it’s an even better bet for risk-tolerant investors.

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