Tilray Earnings: Slashing Our Fair Value Estimate on Slower Revenue Growth and Margin Contraction

No-moat Tilray issued disappointing (February-ended) fiscal 2024 third-quarter results, including slower revenue growth and margin contraction. Changes to our forecast alone imply a valuation reduction roughly in line with the ensuing market price decline of about 21%. In addition, we’ve removed all contribution to our fair value estimate from Tilray’s ownership of US multistate operator Medmen’s senior secured convertible notes, as a complete write-off of the investment seems inevitable. The asset had composed about 20% of our fair value estimate. Thus, due to these two factors, we are cutting our fair value estimates to $2/CAD 2.70 from $3.10/CAD 4.20. As reflected in our Very High Uncertainty Rating, changes to our forecast can have dramatic effects on our fair value estimates, especially as Tilray has yet to achieve positive free cash flow. Shares trade close to our updated fair value estimates.