Tilray Inc TLRY reported stable first-quarter results Monday, beating expectations across key metrics.

Given this performance and upbeat management commentary around the COVID-19 impact on sales in the Canadian cannabis industry, the pressure on the company’s stock is surprising, according to Cantor Fitzgerald.

The Tilray Analyst

Pablo Zuanic maintained a Neutral rating for Tilray and raised the price target from $7 to $8.

The Tilray Thesis

Tilray reported first-quarter sales of $52.1 million, ahead of the consensus estimate of $49.3 million and driven largely by its hemp foods business, Zuanic said in a Monday note. (See his track record here.)

COVID-induced stockpiling and new listings and promos at Costco Wholesale Corporation COST resulted in better-than-expected growth in the cannabis business, the analyst said. 

While sales of recreational cannabis grew 23% sequentially, the domestic medical cannabis business grew 21%. International cannabis sales bounced back after a decline in the previous quarter.

Tilray exited the March quarter with $174 million in cash versus $97 million at the end of fiscal 2019.

Tilray continues to expect the Canadian recreational market to double in 2020, although the coronavirus may negatively impact store openings, Zuanic said. 

The company maintained its margin and cash flow targets for the year. Given the first-quarter beat and upbeat commentary, it’s surprising that the stock ended Monday’s trading down by 6%, the analyst said. 

TLRY Price Action

Shares of Tilray were down 3.74% at $7.78 at the time of publication Tuesday.