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Tilray: $4 Billion Market Opportunity In German Adult Recreational Cannabis

Dec. 03, 2021 11:12 AM ETTilray Brands, Inc. (TLRY), TLRY:CA46 Comments


  • The German soon-to-be-three-party coalition government recently announced its plans to legalize the use of adult recreational cannabis.
  • The nation of 80 million people is poised to grow its annual cannabis sales market to $4 billion within three years of legalization.
  • Tilray is currently the market leader in German medical cannabis extracts sales. The company will likely dominate the region's adult recreational cannabis market as well.
  • We believe that Tilray’s 5x 2023 forward EV/sales multiple, while expensive, suggests that investors have yet to price in the German opportunity.

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The German soon-to-be-three-party coalition government recently announced its plans to legalize the use of adult recreational cannabis. In response, investors have rushed to invest in German cannabis companies, causing their valuations to increase significantly in the last 10 days; for

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of TLRY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (46)

Gray Drake profile picture
Yesterday's option volume on TLRY defines the current excitement. The beginning of short term run, or a fleeting assion that will end next week?
Gray Drake profile picture
The possibility of legalization in Germany has only begun recently. I used to take Mercedes 10 years to go from concept to the launch, when the timing in the US was 3.5 years. What is a rational date for the legalization of pot in Germany?
@Gray Drake it’s already legal as a prescribed medical product. The relaxation of the law to allow purchases from a pharmacy without prescription should be in place in H2 2022.
Germany will be EU GMP sold via pharmacies without prescription . Not a recreational market. Cultivation in Germany is insanely expensive due to labour and electricity prices. Good luck Tiltra.
imminent legalization in germany ... www-fair--news-de.translate.goog/...
This company is losing tons of marketshare twitter.com/...
OneStrawRevolutionFarming2023 profile picture
@spinnakercolitis Fair enough and thank you :-)

Yes, it appears that Canada is choosing the excellent quality from the "anklebiters" CRAFT growers instead of the poor quality from the "We aren't farmers" "Yalies" from Tilray :-)

How many Canada Cannabis 1.0 companies will survive, if any :-)

The CRAFT trend is safety and quality and perhaps a local vibe vs. corporate cannabis and this trend might continue unabated until the Wellness landscape in Canada is populated by those companies which understand this is a medicinal plant and not exclusively a CPG or CPG ingredient =

please give us patients excellent flower at ALL PRICE POINTS and we know what to do with it and we'll come back to buy Hash and Kief from your company, too and prerolls if they are $2 or $3 dollars a gram (that is an enticing and almost irresistable price level for prerolls and it can be achieved with ZERO BAG APPEAL/GREAT EFFECTS cannabis grown outdoors :-)

First CRAFT growers to establish a ZERO BAG APPEAL niche in the market for prerolls AND flower is going to make even more money perhaps because the costs are less potentially :-)

Which are the CRAFT growers which might have the gumption and the ability to try to sell ZERO BAG APPEAL at lower prices but with great effects :-)

One way might be to get international genetics and introduce ZERO BAG APPEAL that way so it isn't a trendy flower but something new and not yet established as a BAG APPEAL flower :-)

Another is simply to continue to provide BAG APPEAL and then test pilot some ZERO BAG APPEAL and see what the results are - some folks who have traveled internationally might understand the ZERO BAG APPEAL concept and Sun Grown people probably can understand especially if it goes into a preroll :-)
SA_NG profile picture
IMO.. we should not encourage these companies. we all know
Stock has just dropped like a rock and looks poised to drop again today. It all started with Barclays downgrade and just hasn’t stopped dropping since then.

Any thoughts on where the bottom is and do we go back up?
This stock has a lot to prove given dismal performance and insane management compensation...why so GREEDY☹️☹️☹️☹️
OneStrawRevolutionFarming2023 profile picture
@HOSEDBY YOU Fair enough and thank you :-)

The "Yalies" at Tilray clearly are in it only for the money and have yet to demonstrate that they care about patients the most :-(
$VVCIF also just completed their first Medicinal shipment to Germany , through their owned licensed Sub. in Germany ..
$ 4 Billion market , Hmmm ..
OneStrawRevolutionFarming2023 profile picture
@Balaland Fair enough and thank you :-)

Just got back in VVCIF = might be cheapest way to get those revenues from Germany :-)

Very excited because VVCIF apparently ALREADY knows how to grow quality cannabis and has been doing so for years; also apparently very good local community folks :-)

Cannabis: local and local international :-)
@ChemicalfreeNaturalFarming2021 ,
Yep , been around for quite some time , and are growing organically ..
They are growing steady , now into Germany with their first Medicinal shipments , to their wholly owned Sub. selling product , can't wait for their next reporting ( SEDAR ) ..
When Rec. Legalizes in Germany ( Soon ) , they will be ready at the starting gate ..
$VVCIF is in my long term position account , and in the drawer ..
Good things come to those who wait .. IMO ..
G.L.T.A. invested ..
colorado buff profile picture
@Balaland 0.07 a share pump and dump
If you want exposure to the German market why not own Curaleaf ? It has exposure to US markets and is a better value.
Thanks for the write up, good job and balanced with the risks. A lot of newer investors are looking for super growth and zooming share prices over very short terms. That’s not what this stock is.
Since Simon signed on as CEO with his experience and vision, he’s taken this company from basically a start-up to a worldwide contender in a new industry. It’s been a slow and bumpy ride for investors but this change in leadership in Germany, and thinking by governments around the world, has provided opportunities for us to own a long term powerhouse that hasn’t hit full stride yet.
Investor1546 profile picture
@deeminimus Simon did not do most of this. It was Vic that did most of it and Aphria was not a start up lol I still don’t think Tilray was a smart acquisition. Tilray was garbage and Aphria never should have combined with them. You give Simon way too much credit. Vic set the stage for everything you see happening now.
Vic left in Feb 2019. He left after accusations of shady dealings of acquisitions. He had ideas but Simon brought them to life.
Is it already known, if Germany will allow to sell only domestic (EU) products? If not, I don't see any value in Tilray's current position. Altria with tobacco products has the biggest distribution network, I would guess.
Investor1546 profile picture
Tilray’s executive compensation. Why not buy US MSOs? Forward multiples are much cheaper.
@Investor1546 Roger Goodell is paid $60M / year just to babysit the 32 billionaires he works for.
As far as CEO's of global businesses, Simon is on the low side of compensation.
Yes fwd multiples are currently cheap for MSO's and are based on estimates. When current numbers change, so will the estimates for any stock.
colorado buff profile picture
@deeminimus actually he is on the high side, the nfl is a juggernaut and Goodell helped the billionaires increase the value of their franchises tremendously. Simon has done nothing yet. Though the market hasn’t been established as too many countries still illegal.
@colorado buff

I’m not sure about Simon doing nothing. I pulled up Apha numbers from 2019 onward. He jacked their revs 3X from the previous year after he started, then almost 3X again since then.
colorado buff profile picture
4 billion market for 80 million a bit light considering Canada will be a 9 billion dollar market for 35 million.
Chuck53 profile picture
"Tilray is currently trading at $10.57" I'm old enough to remember the time Tilray ACTUALLY traded over $10.
Shorts been having their way with Tilray all year. Hopefully we bottom soon in the 7’s and resume up...Executive pay plan is a disgrace or rather disgusting given the performance...hope a real activist gets involved soon and clears out boardroom cancer that permitted this aggregious behavior
OneStrawRevolutionFarming2023 profile picture
This thesis appears to be based on the concept that the "Yalies" at Tilray will be able to grow very good/excellent/transcendent cannabis in Germany/Europe which might mean that the thesis is based on quality :-)

Once the topic shifts to quality,
the focus shifts to

USA/Mexico/Central America/Southeast Asia (and more) quality cannabis vs. the "Yalies" at Tilray and

most intelligent investors who are smart and

who know the value of quality cannabis and

it probably is that most investors will NOT see the "Yallies" at Tilray as either

the LONG-TERM or the short-term to German patients accessing quality cannabis :-)

First mover advantages mean almost nothing when USA cannabis, for example, can achieve quality as well as any country and can produce massive volumes rapidly =

if the Germans authentically want the best combination of safety, quality, and volume then they will probably be interested in USA cannabis

(as will other expensive people)

and once that inquiry is made the "Yalies" might be out of business and the investor money might be gone :-)

This thesis seems difficult to believe just based on the volume of illicit cannabis that likely enters into Germany and

are the "Yalies" really up to the task of replacing all of that and

who are the investors who believe that Tilray can "dominate"

(there is the SA author's favorite trigger word it seems even though investors see clearly it is irrelevant because this is NOT a scale industry)

against USA/Mexico/Central America/Southeast Asia cannabis which can provide many microclimates

(epigenetics to grow many kinds of cannabis)

and many varieties of cannabis =

this thesis is based on the notion that Tilray workers in greenhouses in Germany and Europe are going to hold off the competition from the massive volume that USA/Mexico/Central America/Southeast Asia can provide :-)

This appears to be a microclimate industry and

the producers of cannabis which can produce safety, quality, local Ethos and local international Ethos from a myriad of microclimates which can produce a polyculture of botanical medicine in the aggregate

will probably be able to establish more revenues which infrastructure-based cultivation might not be able to match :-)

If the Germans value hops for their beverages, then likely they will value cannabis inputs that manifest from the safest and greatest variety of microclimates which produce excellent quality and

the USA/Mexico/Central America/Southeast Asia will probably provide too many options for Tilray to match at any time :-)

Tilray is a stock prop that has an expiration date which investors probably have to determine beforehand = the "Yalies" are not excellent quality producers and apparently haven't been in Canada so far because volume does not equal quality for Canada Cannabis 1.0 companies :-)
In order for a population of 80 million to support a $4 billion market, every man, woman and child would need to consume $50 per capita. Just sayin'...
Investor1546 profile picture
@guyrhansen Canada is 35 million people and their market is already 3 billion annually and only has been legal for 3 years. It is likely that 4 billion is conservative. Just sayin.

I don’t know how good the comparison may stack up but according to Wikipedia, Germans consume 99 liters of beer per capita per year.

Just imagine 10% of the normal beer drinking crowed of people use recreational cannabis a few times a day. That would mean $4B estimate is too conservative.

Found it on the web. It says that Germans spend an average $1,907.78 per year on beer, the top figure in the study.

What if Germans eventually spend 10% of beer money on recreational cannabis? Simple calculation comes out to $15B per year.

I think possibilities are pretty much endless and growth of cannabis market could be enormous if entire EU follow after Germany.

Tilray will be bankrupt before an adult use sale is made in Germany
@ProfientInvestor Like Tesla,seven or eight years ago ????
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