Why Did Tilray Stock Pop Today?

Key Points

• Alliance Global Partners cut its price target on Tilray stock this morning.

• Investors bid the stock up despite the bad analyst news.

• It's been seven years since Tilray last earned a profit, and it could be four more years before that happens again.

• 10 stocks we like better than Tilray Brands ›

Alliance Global Partners cut its price target on Tilray Brands (NASDAQ: TLRY) stock by 25% this morning, from $1 to just $0.75 per share, as The Fly just reported. You'd probably expect news like that to have an impact on the stock, and it did... but perhaps not the effect that you think.

As of 2:05 p.m. ET Tuesday, Tilray stock is up 15.8%.

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What Alliance Global said about Tilray

Investors' reaction to Alliance Global cutting its price target doesn't make a whole lot of sense (to say the least). According to the analyst, Tilray is experiencing "softness" in international sales of cannabis, and in its alcohol sales as well. (Best known as a marijuana stock, Tilray actually gets 25% of its revenue -- and 40% of its gross profit -- from the sale of alcoholic beverages.)

This is leading Alliance Global's analysts to cut their forecasts for Tilray's earnings this year, and to cut their price target as well. Tilray stock does, fortunately, cost only a couple of pennies more than the new price target, however, and so Alliance Global gives the stock a neutral rating.

Is Tilray stock a buy?

Even "neutral" may be generous, however. Tilray hasn't earned a profit since 2018, back when marijuana stocks were still popular among momentum traders. It hasn't generated positive free cash flow (FCF), well, ever.

Even optimistic stock market analysts don't see the company turning profitable before 2029 at the earliest, although forecasts do call for positive free cash flow in 2026. Personally, though, given the company's track record I'm going to have to see that happen to believe it. If Tilray does report positive FCF next year, I'll be happy to reconsider the stock.

For the time being, however, I can only call Tilray stock a sell.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.