Cannabis producer Tilray falls short of its rivals in a few key areas, analyst says

• Tilray traded down 2% Friday after a research analyst initiated coverage with a bearish report.
• The analyst said rivals Aurora Cannabis and Canopy Growth are better positioned to capitalize on opportunities in the recreational-marijuana space in both the US and Canada.
• Watch Tilray trade live.

The cannabis producer Tilray is falling short of major rivals in several key areas, according to a bearish initiation report by Jefferies analyst Owen Bennet. He gave the stock an "underperform" rating and $61 price target - more than 10% below where shares were trading Friday.

Bennet's report concluded that Tilray is falling short of rivals Canopy Growth and Aurora Cannabis in the Canadian recreational business and also has less potential for expansion into the US recreational market.

While Bennet noted Tilray's relative strength in the global medical market for cannabis, the report recommended caution given the limited visibility of potential intellectual property and drug formulations which may or may materialize.

Tilray inked a deal with Novartis in December 2018 to partner with the Swiss medical giant in developing and distribution of medical-marijuana products. Additionally, the cannabis producer has been an active acquirer, purchasing the leading hemp food company and cultivator Natura Naturals earlier this year. It also signed partnerships with AB InBev and Authentic Brands Group to develop and distribute cannabis-based products.

"For us, names in the space trade up on any headlines around CPG/big brand partnerships, without any apparent thought process to the real value they bring," Bennet said.

"Tilray, we feel, is an example of this with its deals with ABI and ABG. While potentially beneficial, we think the market has overestimated the near-term significance and value creation."

Jeffries also cites Tilray's share ownership as a source of potential volatility, with Privateer Holdings owning 75% of outstanding shares.

Tilray was down about 2% Friday. It was trading at 19 times 2020 sales, according to Bloomberg data, a premium to rivals Aurora and Canopy.