On Wednesday, Tilray Inc. (NASDAQ:TLRY) shares edged 3.4% higher after BofA analysts heaped praise on its latest investment in MedMen Enterprises. The company said it purchased the majority of outstanding convertible notes of MedMen enterprises and BofA sees the investment as a positive for the company’s targeted US expansion.
Analysts Heather Balsky, maintaining a buy rating on TLRY shares wrote:
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We view each incremental transaction in the US cannabis market as a positive catalyst.
Balsky’s has a TLRY price target of $21.50, implying an upside potential of nearly 60%, citing a potential undervaluation of the Aphria merger. However, the analyst pointed to the upcoming shareholder vote to increase outstanding shares as a potential downside risk, should it fail to pass.
Should you invest in Tilray in Q3 2021?
From a valuation perspective, Tilray shares trade at a steep price-sales ratio of 12.18. However, its price-book value of just 0.79 indicates a potential undervaluation, making the stock attractive to value investors.
Furthermore, analysts expect earnings per share to grow by 36.60% this year before rising at an average annual rate of 49.30% over the next five years. Therefore, the company’s growth prospects are attractive to growth investors.
As such, buying Tilray shares now may yield significant returns once its merger with Aphria begins to pay off. Moreover, its expansion in the US and Europe could drive long-term growth if cannabis gains Federal legalization in the US.
Technical overview: Tilray stock price forecast for August 2021
Technically, Tilray shares seem to be trading in a gently descending trend formation in the intraday chart. The stock recently bounced back to avoid dropping to oversold conditions of the 14-day RSI. It remains below the 100-day moving average after crossing under in April.
Therefore, investors can target extended rebound profits at approximately $16.71 or higher at $19.79, while the support levels are $10.97 and $7.89.
Bottom line: the case for buying Tilray shares now
In summary, although Tilray shares continue to trade under significant bearish pressure, the recent rebound could continue further until the stock price approaches overbought conditions.
Furthermore, the stock seems substantially undervalued based on the P/B ratio, making it attractive to value investors. Therefore, it may be the time to pounce on the rebound ahead of the company’s exciting growth prospects.
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