Tilray Stock Reverses Lower, Despite Revenue Beat

TLRY call options were hot ahead of earnings

by Lillian Currens

Published on May 15, 2019 at 10:07 AM

The shares of cannabis concern Tilray Inc (NASDAQ:TLRY) were higher in early trading, after the firm shared its first-quarter results. However, while traders initially cheered the company's biggest revenue beat since going public -- thanks to the legalization of recreational marijuana in Canada last October -- TLRY shares are now down 2.8% at $47.36, perhaps as traders jeer a steeper-than-expected per-share loss.

TLRY stock has seen a major pullback since last September's high of $300. The equity has been trading in a channel of lower highs and lows in 2019, with downward pressure emerging at the 20-day moving average. In fact, the security hit a year-to-date low of $44.31 just last week. 

Sentiment is split on TLRY, with three analysts giving it a "strong buy" rating, compared to five "hold" or "strong sell" recommendations. The consensus 12-month target price of $96.29, however, is roughly double the stock's current levels. This could leave the shares vulnerable to price-target cuts.

It looks as if bulls were dominating the options front ahead of earnings. Currently, Tilray sports a 10-day call/put volume ratio of 1.73 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio indicates that buyers picked up nearly two TLRY calls for every put in the last two weeks. 

On the other hand, short sellers have also been upping the ante, with a 22% surge in short interest in the last reporting period. The 4.46 million shares sold short represent over a one-third of the stock's available float. As such, some of the recent call buying -- particularly at out-of-the-money strikes -- may have been attributable to shorts seeking a pre-earnings options hedge. 

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