Tilray climbs 10% as the cannabis company gets a double upgrade to ‘buy’ from Jefferies

Tilray marijuana
A Tilray worker tends to cannabis plants.

  • Tilray shares jumped 10% on Friday after Jefferies upgraded the cannabis company to a buy rating.
  • Tilray’s tie-up with Aphria was a “perfect match,” said Jefferies, which also raised its price target to $23 a share.
  • In the analysts’ upside scenario, the stock could climb to $31.
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Tilray shares stepped up by roughly 10% on Friday, bolstered by a double upgrade to “buy” from “underperform” at Jefferies, which said the cannabis company entered into a “perfect” merger with Aphria.

The rating was lifted from underperform in a note published Friday. Jefferies also raised its price target to $23 a share from $4.77, which would represent 63% upside from Thursday’s closing price of $14.15.

The analysts said in an upside scenario, the stock could rise to $31, which would mark an upside of 119% from Thursday’s close.

Tilray said in December it had planned to merge with Aphria in a $4 billion deal that would create the world’s biggest marijuana company.

“For us, when Aphria and Tilray combined, it was the perfect match,” said Jefferies equity analyst Owen Bennett. “In Canada, a leading portfolio of brands, supported an efficient cost structure. In Europe, the market is now picking up, while Tilray’s scale and Aphria’s unique German positioning make it perfectly suited to succeed,” he wrote.

Meanwhile in the US, the combined company’s portfolio of consumer goods and strong balance sheet supports “excellent optionality” around both THC and cannabidiol, or CBD. When full federal legalization arrives in the US, brand awareness of hemp-food/CBD and alcohol offerings will be advantageous, with Jefferies seeing the US market sized at $50 billion in 2025.

Shares of Tilray on early Friday climbed by 9.9% to $15.55 in heavy premarket volume. The stock has pushed higher over the past 12 months by 81%.

Jefferies said it has been mostly cautious on Tilray during its coverage. “Our issue has been that while arguably being the best-placed business to capitalize on future European growth, industry development in that region to date has stalled.” At the same time, Tilray’s Canadian business had “struggled” and it saw Tilray as not taking advantage of its opportunity in the US, “arguably due to its constrained balance sheet.”

But it had been bullish on Aphria, it said, citing the company’s strong approach to branding and efficient cost structure while it had a “very robust” balance sheet.

When “the Tilray and Aphria businesses announced they would be combining in December 2020, we were encouraged. In our view, a combined company presents a compelling proposition,” wrote Bennett.

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Airbnb and DoorDash sink as analysts turn skeptical of massive IPO rallies

airbnb ipo nasdaq
The Airbnb logo is displayed on the Nasdaq digital billboard in Times Square in New York on December 10, 2020. – Home-sharing giant Airbnb was set for its Wall Street debut Thursday with a whopping $47 billion valuation amid a feverish rush for new shares in companies adapting to lifestyle changes imposed by the coronavirus pandemic. (Photo by Kena Betancur / AFP) (Photo by KENA BETANCUR/AFP via Getty Images)

  • Airbnb and DoorDash shares fell on Monday after analysts downgraded the newly public companies’ stock.
  • Both firms surged last week as outsized demand pushed prices well above their IPO levels.
  • Gordon Haskett downgraded Airbnb to “underperform” from “buy,” and expects shares to fall roughly 20% from current levels.
  • DA Davidson lowered DoorDash to a “neutral” rating from “buy,” adding that the company’s stock price leaves little room for future error.
  • Watch DoorDash trade live here.
  • Watch Airbnb trade live here.

Airbnb and DoorDash both tumbled on Monday as analysts downgraded ratings following both firms’ colossal public-market debuts.

Airbnb sank as much as 10.1%, while DoorDash plunged 13.6% at intraday lows. The two companies collectively raised $6.7 billion in back-to-back initial public offerings last week, capping a record year for IPOs. Massive demand for the firms’ shares fueled massive gains in their first days of trading, but analysts covering the companies are growing concerned that the stocks climbed above rational trading levels. 

Gordon Haskett changed its rating for Airbnb to “underperform” from “buy” on Monday, eschewing the bullish outlook he held for the firm just one week ago. The home-sharing company’s valuation is “more than stretched” after more than doubling in its Thursday debut, the firm said. Airbnb also trades at two times its estimated gross bookings value, where the average online travel group trades at a 0.6 multiplier, Gordon Haskett said.

The firm lifted its price target to $103 from $77, but the level still implies a roughly 20% drop from current levels.

Read more: Shark Tank investor Kevin O’Leary told us 2 concrete strategies for building wealth over time – and shared how a rude awakening during the pandemic led him to build a new investing app

Separately, DA Davidson downgraded DoorDash to “neutral” from “buy” following the firm’s 86% opening rally. The firm still feels DoorDash deserves to trade at a premium multiple due to its leadership in the food-delivery sector but noted its stock price leaves little room for error.

DA Davidson boosted its price target for DoorDash to $150 from $93. That level implies a slight drop from the stock’s current price. No other analysts have initiated ratings on DoorDash shares. 

Despite the shift in analyst sentiments and Monday losses, both companies still trade well above their IPO prices. Their rallies have fueled new scrutiny of market optimism, with some strategists concerned that the outsized demand for new issuances is a symptom of dot-com-era greed.

DoorDash traded at $157.51 as of 3:10 p.m. ET Monday. Airbnb traded at $129.33.

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