Good morning everyone! Every Thursday morning we highlight our favorite trade setup of the week. This week, we will be taking a look at a flush setup in TLRY.
Sorry for the lack of posts here and on SeekingAlpha recently, a few of us are out of the office in Okemo, VT taking some vacation. We will be back to regular posting next Monday.
This setup is simply too good to miss, though.
Tilray is well known in the trading community as a small scale non-U.S. based cannabis grower, but the company has been rapidly changing over the last year. It has been securing contracts with multiple countries, including the EU and others, and has recently entered the U.S. market (the one that matters) through an investment in MedMen, that gives it the majority holding via convertible notes and warrants. It also recently closed a merger with APHA, which solidifies it as one of the most important weed stocks around.
In other words, the company is making the right moves, and is set up to outperform long term in the event of positive legal weed outcomes in the U.S. and internationally.
However, the stock has been weak recently, down 81% from it's short squeeze high this January, dripping almost every day. It has recently found support around 12.50, which is an important support for the share price, but remains weak overall.
We are expecting a flush below 12.50, which should produce an attractive entry point into this stock for the longer term. The valuation isn't even that stretched anymore either, trading at 6.6x TTM sales (less than AAPL), and with a huge potential growth opportunity.
Because the stock is so volatile, it's a great candidate for a put selling opportunity. If it ends up happening, we expect that the stock will flush to around ~$10, where we would like to sell puts at $9 or $8. This would give us an extremely attractive entry point to this growing company and market, at a lower price than you're getting for the megacaps which operate in TAM constricted, peak growth environments. Plus, the yield earned we estimate would be around 80% annualized, which seems highly attractive. Nothing like a combination of Margin of safety and high volatility to make for the perfect setup!
Agreed. Broader industry in a down trend, TLRY trend is down. Gap lingering, and no institutional buying. Lets see what we get. We can always buy a reversal, but remaining sidelined right now is just the smart thing to do.
PropNotes
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@Barkworth, Yup. no need to fight the trend yet, but in a capitulation situation, or at a point where the margin of safety is big enough, then it makes sense to take some risk here given how much the company has improved operationally over the last 12m. CSP seems like the best option, but a real long term investor could just DCA $10 and under to get the same rough net effect. Vol is so high though, seems like a waste not to take advantage...
tomer0035
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I’m no good with technical but I’m good with numbers if now they will fall to 10 -8 it’s going to give to everyone that not in to get a big benefit but they are going from today to the moon they not going back any more you can forget from all the technical the fundamentals are in control from now let test this comment after Christmas good luck to all
Tilray has become a hot topic in Reddit in case you guys are unaware.
Post to read up:
reddit.com/r/TLRY/comments/plzh8p/legalization_is_bound_to_happen/?utm_medium=android_app&utm_source=share
reddit.com/r/TLRY/comments/plitzh/if_you_walk_this_far_dont_give_up_that_is_how_the/?utm_medium=android_app&utm_source=share
reddit.com/r/TLRY/comments/pmnsa4/4b_revenue_by_2024_that_a_humble_statement/
reddit.com/r/TLRY/comments/plzb8p/tilray_is_known_as_the_apple_of_pots_now/?utm_medium=android_app&utm_source=share