Buyers of Dogecoin (CRYPTO:DOGE) are making a bet. It’s not just a bet on cryptocurrencies; it’s a belief in the hype from billionaires like Mark Cuban and Elon Musk. But Dogecoin, which started out as a joke, has a lot to overcome before a long-term investment in it can succeed. And for investors really looking to grow long-term wealth, gambling on a short-term pop in value (for any company or currency) isn’t the way to do it.
The cannabis industry has its share of risks, and conditions that are out of the industry’s control can certainly help determine a marijuana company’s success. However, these companies — unlike Dogecoin — are actual businesses, bringing in revenue, with a path to success. Those wanting to make a speculative buy could consider purchasing shares of cannabis powerhouse Tilray (NASDAQ:TLRY) — it’s not necessarily a sure thing, but it’s more likely to reward you than buying Dogecoin.
The new Tilray — which was recently formed after a merger with fellow Canadian cannabis company Aphria — has plans to grow well beyond Canada. For the full year 2020, Tilray’s revenue increased 26%; sales from its international medical cannabis segment, however, jumped 153%. Though that segment made up only 16% of total revenue for the full year, its growth did accelerate in the fourth-quarter period ended Dec. 31.
And the company continues to expand internationally. In April, Tilray revealed a new distribution partnership with a U.K. medical cannabis distributor, Grow Pharma, which will import and distribute Tilray’s pharmaceutical-grade medical cannabis. Tilray’s managing director in Europe noted at the time that more countries across Europe are appreciating the benefits of medical cannabis. Tilray also recently sent its first medical cannabis shipment to Spain, and will begin selling medical cannabis in Portugal.
On the Aphria side, the company set itself up with distribution infrastructure in the U.S. when it bought craft brewer SweetWater Brewing last year. That adds to Tilray’s footprint, as the latter already sells hemp food and wellness products in the U.S. through its Manitoba Harvest business.
Tilray’s overall hemp business made up more than one-third of total sales in 2020. But the U.S. hemp and beer businesses could be even more valuable to the company as a framework for distribution should federal marijuana legalization occur in the U.S. There is, of course, no guarantee that this will occur. But legalization is expanding at the state level. Currently, 17 states plus the District of Columbia have passed adult-use regulated cannabis legislation.
An investment in Tilray is partially speculation on its growth in the U.S. In a statement upon closing the merger with Aphria, the company said it “expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis products.”
Speculating and investing
In the meantime, the company expects to continue growing in Canada and Europe. It has production facilities in Germany and Portugal, with a new medical brand recently launched to add to its existing medical portfolio in Canada.
But profitability isn’t imminent. In Aphria’s final quarterly earnings report prior to the merger, it said its net loss grew versus the prior-year period. And Tilray’s net loss also grew sequentially in its fourth quarter compared to the third quarter of 2020. Pricing pressure and pandemic impacts have been affecting many Canadian cannabis companies.
All that said, a speculative investment in a business like Tilray can still have a place in one’s portfolio. Buying into the Dogecoin hype is more like gambling. Investors who want to make a bet should pass on that and look at adding Tilray as a longer-term speculative investment.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.