Tilray adds capacity, should see stock move upward

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But investors shouldn’t expect big gains anytime soon

About a week ago, Tilray announced that it was prepared to increase the production and manufacturing capabilities at three of its installations in Canada. By the time the expansion is complete, the cannabis company will have another 203,000 square feet, bringing the total amount to about 1.3 million. The news, under most circumstances, would have seen the company’s stock price improve immediately, but Tilray was the exception – it dropped 2.5% on May 8 and was down 9.1% as of May 13. However, this is not indicative of the company’s future, and investors need to be prepared to wait for the long-term results.

Part of the reason Tilray’s stock didn’t do better is because the announcement came almost at the same time the US administration announced new tariffs against China. Those tariffs have taken the US-China trade war to a new level, and have threatened all stock markets and suppressed virtually all international trade.

In addition to the trade war, Tilray is facing the same obstacle faced by most. Cannabis companies are, generally speaking, not yet profitable. Because of this, there won’t be a return on the expansion investment. However, Tilray, thanks to the expansion and its acquisition of Manitoba Harvest this past February, has seen the company already start to produce dividends and, as Manitoba’s operations continue to produce, those dividends will increase.

The addition of Manitoba increased Tilray’s top-line revenue 162%. It also reduced the company’s net loss. Part of the reaction will be seen today when Tilray releases its first-quarter financials, but investors shouldn’t expect to see a substantial return on their Tilray holdings until early next year.