Tilray Brands Inc. (NASDAQ: TLRY) saw its shares pop on solid results after releasing its fiscal fourth-quarter earnings once markets closed on Monday. Shares jumped over 8% in early trading after the beverage and cannabis company raised its guidance for net revenues to be between $950 million and $1 billion, with mid-single digits of organic growth.

FactSet consensus for fiscal year 2025 was at $865 million for Tilray and Equity analyst Pablo Zuanic of Zuanic & Associates estimated 2025 sales at $850 million. He wrote, “We have increased our net sales estimates to $900Mn (1.05 x $855Mn), but we will remain a shade below guidance. Management has confirmed that the revenue guidance does not include potential future M&A.”

The company is basing its guidance on the potential business in the beverage markets and the German cannabis market. CEO Irwin Simon also noted in the company’s earnings call that rescheduling in the U.S. would change things at Tilray but didn’t go into any details.

Delta-9 beverage boost

Simon said that he sees an opportunity in selling infused beverages in the U.S. Simon told investors on the company’s earnings call, “We also relaunched HiBall Energy Drinks on Amazon and plan to launch new hemp-derived delta-9 beverages strategically in selected markets, including Texas and New Jersey, where we can leverage our existing beverage distribution network. Our hemp-derived delta-9 formulations are complete, and we’re actively developing a target launch strategy to ensure maximum impact.

He told investors that if Tiray could sell the THC beverages that it produces in Canada today in the U.S., it would be a large-sized business.

There are a lot of our beer distributors that have reached out to us and want the product right away because they have seen in markets where it is how well the sales are doing.

Zuanic wrote in his report, “The resurrection of Hi-Ball energy and entry into Delta 9 drinks could be quite additive to top line.”

Germany’s promise

Tilray’s international business net revenue grew by 22% year-over-year to approximately $53 million and remained the No. 1 market leader in medical cannabis across Europe. The company said its annual growth during fiscal 2024 was driven by increased sales in Germany, Poland, the U.K., Australia, and New Zealand. In Germany, Simon said the company was best positioned to capture a majority of the expected incremental growth in the cannabis medical market, which is projected to be approximately $3 billion in the medium term.

On April 1st, the Cannabis Act became effective in Germany, which declassified cannabis as a nonnarcotic. Simon said on the investor call, “Since the Cannabis Act went into effect, we have already seen a 65% increase in sales.”

He added, “We believe that Germany is declassifying cannabis as a nonnarcotic will also have a far-reaching impact on the drug policy throughout Europe. The European opportunity could represent a potential $45 billion medical market alone over the long term, and our presence in Europe allows Tilray to grow our global brand portfolio to a base of 700 million people, which is twice the population in the U.S.”

Zuanic wrote in his note, “We now assume Germany is at an annualized run rate of almost $400Mn by end of CY24, $1.5Bn by end of CY25, and $2.9Bn by end of CY26.”

Denis Faltischek, President, International Business and Chief Strategy Officer did caution that the German government is becoming overwhelmed with the import and export permits. He said, “We’ve been hearing basically given some of the increased demand on medical cannabis in terms of increasing patients, increasing number of prescriptions, we have, in fact, seen the permit timing going from two weeks to six weeks.”

He noted that filling prescriptions quickly due to increased demand was a bottleneck to growth. However, he said he believes that fulfillment will start to level out and only considers it a temporary restriction on growth. He also pointed out that Tilray competitors are facing the same supply issues – namely that flower sells out as quickly as it hits the market. He said the extract side of the business is growing more slowly.

High notes

Zuanic said he believed that Tilray should be a long-term holding for cannabis investors, but kept his rating for the stock neutral based on valuation. He said he might upgrade based on the following:

• Actual international markets growth and how TLRY directly benefits (can it hold on to share?)
• Tilray’s ability to reverse recent domestic rec market share loss
• Accretion, nature, and scope from future US deals
• Progression of key financial metrics improve (FCF, EBITDA per share)

The company seemed enthusiastic to deliver the earnings results for investors. Simon thanked shareholders for being patient as the company assembled its lifestyle portfolio of brands.

Simon said, “If I look back to 2019, at being a $50 million business. And this year, you know, we have guidance out there between $950 million to $1 billion.”

While many cannabis companies hang their hopes on rapid growth in Germany, Aurora Cannabis (NASDAQ: ACB) executives offered a more realistic view of its prospects and challenges in the European country following regulatory changes this year.

During the company’s fourth-quarter earnings call on Thursday, CEO Miguel Martin disputed the predictions of rapid market expansion in Germany.

“We don’t see doubling,” he said, instead suggesting more modest growth of “20% to 30% annually at a minimum.” And to be fair, that’s really strong growth, but it’s not as grand as many have proclaimed it will be.

Part of the reason for moderating the prediction, Martin explained, is that the German medical cannabis system operates differently from other markets.

“In Germany, it is a relationship – as it is with other medical products – between a prescribing physician who’s prescribing a specific product at a specific dosage,” he said. “And then the patient is getting it fulfilled out of pharmacy.”

That approach contrasts with less restrictive systems like seen in the U.S. state markets, where patients have more flexibility in product selection, Martin said.

“That being said, being in a traditional pharmaceutical model does allow for a steadier cadence and very importantly, allows for good margins because the flow of the economics start with the wholesale price, so you don’t see this massive compression in either the self-pay or the insured market that you see in other markets,” he said.

“And so is it a little bit slower? Yes, is it a bit more traditional? Yes. Both which we like, but also, like other pharmaceutical products steadier from a margin standpoint.”

Data limitations

The Alberta-based company also faces challenges in obtaining current market data in Germany, Martin noted. He told analysts that manufacturer shipment information is only available quarterly, making it difficult to assess immediate effects of regulatory changes.

“It will probably take a quarter for that data set to sort of catch up and see what the shipments are,” he said.

Martin also pointed out that Germany’s strict requirements for bringing cannabis products to market create big barriers for new market entrants, but they can benefit established players like Aurora.

“Packaging and permitting in order to bring a new product into Germany takes anywhere between 8 months to 12 months,” he said.

Aurora is among three companies with local cannabis cultivation facilities in Germany already. Martin said that the company holds the second-largest market share for cannabis flower products and leads in the self-pay patient segment. He added that three of Aurora’s cultivars are among the top 10 by volume sales in the country.

Martin flagged the company’s ability to meet Germany’s rigorous production standards, including EU-GMP certification for their production facilities, as a competitive advantage.

Aurora’s status as one of the few companies with a domestic cultivation facility provides an advantage in meeting demand. Martin noted, however, that the precise nature of product requirements, including strict potency tolerances, can make consistent supply challenging.

Still, Aurora views Germany as a key component of its international growth strategy. The company believes its experience navigating German regulations will be beneficial as the market evolves over time.

“We are very confident that when the (United States) legalizes, we’ll be in a great position,” he said, while drawing parallels between potential U.S. regulations and the company’s experience in Germany.

Medical cannabis is taking over Europe, as well as efforts to decriminalize cannabis in numerous countries and at local levels. In a pattern similar to what took place in the U.S., European nations are legalizing cannabis for medical or recreational purposes in a patchwork of new laws.

According to a May 16 press release from Victoria, Australia-based Biortica Agrimed, 21 out of 27 member states of the European Union (EU) legalized medical cannabis.

“The EU situation with respect to legalisation can best be described as fluid, but evolving positively,“ said Tom Varga, CEO of Biortica Agrimed. Biortica Agrimed is a vertically-integrated B2B company  preparing to list on the Australian Securities Exchange with an IPO.

The 27 EU countries are Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

Out of those, 21 countries—Austria, Belgium, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovenia, and Spain—implemented laws to allow for the medical use of cannabis.

Out of those countries, the potential market in Germany is among the most exciting and where investors are circling the most at the current moment.

“Whilst EU law prohibits the commercial sale of cannabis, many countries are taking a more mature approach, and legalising, initially medicinal, and ultimately personal use, with Germany in the lead. 21 out of the 27 EU member states have legalised use of medicinal cannabis,” he said, “and 13 countries have either legalised or decriminalised its personal use.”

Countries like Spain have decriminalized cannabis, while Georgia, Germany, Luxembourg, and Malta have taken steps to legalize adult-use. Countries like Portugal have gone even further by decriminalizing all drugs. Dozens more cities in the EU decriminalized cannabis at the city level.

Part of the purpose of Biortica Agrimed’s report is to support the argument that it’s due time Australia takes note of the potential Down Under. Australia legalized medical marijuana in 2016. According to Therapeutic Goods Administration (TGA) data, the number of patient approvals for medical cannabis increased sharply. In Australia, doctors can prescribe medicinal cannabis with the approval from the TGA and the relevant State or Territory’s Health Department.

“The EU comprises world class nations, and Australia should take any learnings that we can from the EU.” he said, “We have the benefit, and indeed the privilege, to view how legislative frameworks have been built over-seas, what’s worked and working, and what the Australian industry and legislators should avoid. Australia really can do better.”

“We look forward to continuing to share our global industry research with the Australian industry, our legislators and regulators, to build an industry that we can all be proud of, an industry that puts patient care, safety and outcomes to the fore, ” said Varga.

Cannabis Prevalence in Europe

Cannabis remains the most popular substance used in Europe according to the most recent counts by European data monitors.

The European Monitoring Centre for Drugs and Drug Addiction’s (EMCDDA) report, entitled “Cannabis—the current situation in Europe (European Drug Report 2023),” describes cannabis as “by far the most commonly consumed illicit drug in Europe.”

The report cites national surveys which show that 8% of European adults (out of approximately 22.6 million people between 15 and 64 years of age) have used cannabis within the last year. An estimated 1.3% of adults (approximately 3.7 million people) are described as “daily” or “almost daily” consumers.

With the popularity of cannabis continuing to grow, the report notes that this often leads to consumer “problems.” “There remains, however, a need to understand better the kinds of problems experienced by cannabis users, as well as the referral pathways and treatment options available for those with cannabis-related problems,” the report stated.

Germany’s legislation to legalize cannabis took effect on April 1. German lawmakers gave final approval to a recreational weed legalization plan known as CanG recently, making the country the largest in Europe to take the step.

In the German capital of Berlin, cannabis smokers gathered at the iconic Brandenberg Gate to smoke weed and celebrate their new freedoms. Other events were held throughout Europe’s most populous country, including one in front of the Cologne cathedral and others in the cities of Hamburg, Regensburg, and Dortmund.

The patchwork of laws unfolding in the EU show how medical and adult-use cannabis are popular on a global scale, and what Australia could learn from European countries.