Why did Tilray Inc.'s stock go up while Canopy Growth and Cronos Group sank today – The Motley Fool

What happened

Actions of Tilray Inc. (NASDAQ: TLRY) were up 13.9%, while Canopy growth (NYSE: CGC) was down 11.6% and Cronos Group (NASDAQ: CRON) slipped 10.3% at 15:05 EDT Thursday. Tilray reported earlier in the day that it received regulatory approvals to export medicinal cannabis flowers to Germany.

With this approval, Tilray becomes the first and, for now, the only marijuana producer to export both cannabis oil and cannabis flower products to Germany. Canopy Growth and Cronos Group are currently supplying cannabis oil products to the German market.

So what

Tilray certainly has a hard time getting the green light to export cannabis flower products to Germany. The country is the largest marijuana market outside of North America. Arcview Market Research and BDS Analytics predict that total cannabis sales in Germany will reach $ 1.6 billion by 2022.

Tilray also has the right to boast of becoming the first company to obtain permission to supply both cannabis oil and floral products in Germany. You can bet that Canopy Growth and Cronos Group would have liked to claim the status of first comer on the important European market.

Tilray also now has even more rights to boast. With current stock market fluctuations, it has replaced Canopy Growth as the world's largest stock of marijuana in terms of market capitalization. Canopy was at the top of the cannabis industry's valuation for most of the past two years.

However, I think the big leap in Tilray's share price and the declines for Canopy Growth and Cronos Group have been exaggerated. The cumulative increase of more than $ 2 billion in market capitalization to news of today is simply not warranted for what is likely to be the case. a temporary advantage for Tilray.

Canopy and Cronos both aim to also supply cannabis flower products in Germany. And although Tilray said that about 5% of its total business revenue of $ 9.7 million in Q2 came from international sales (mainly in Germany), Canopy announced that the German market accounted for 14% of total sales. % of its product revenues: 25.9 million Canadian dollars. You do not need to do currency conversions to know that Canopy has an advantage over Tilray in the important European market where it counts: in hard dollars.

Now what

Everything happens in gangbusters for Tilray right now. But I think it's hard to prove that the company really deserves a market capitalization of more than $ 11 billion.

It is also very difficult to say that Tilray should be worth more than Canopy Growth. After all, Canopy boasts higher sales and greater production capacity. It also has a lot more liquidity, thanks to the recent investment of $ 4 billion in Constellation Brandsnot to mention the benefits of partnering with this leading company in the field of alcoholic beverages.

I have said for several weeks that Tilray's stock price could continue to rise, but that its current pace is doomed to an end. It's always my point of view. What about Canopy and Cronos? Both were due to a pullback, but I do not think today's news is really a good reason for stocks to fall significantly.

In the long run, I remain optimistic about the prospects of large marijuana growers like Canopy, Cronos and Tilray. But investors looking to board the Canadian marijuana train should be very careful. This locomotive is already downhill – and the train could be derailed in the not too distant future. I think Tilray will be the first car out of the tracks.

Keith Speights has no position on the mentioned actions. The Motley Fool has no position in the stocks mentioned. Motley Fool has a disclosure policy.