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Tilray shares rose a few months ago on marijuana rescheduling hopes.
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However, nothing has happened since then and the stock has continued to fall sharply.
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The company has significantly underperformed expectations in recent years.
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Investing in the cannabis industry carries significant risks and you have to be prepared for a lot of volatility. Tilray Brands (NASDAQ: TLRY) is an excellent example of why this is so.
Although it is a leading producer of cannabis in Canada, it has not been a good buy over the years. It has dropped more than 91% in the last five years. Although it was rallying earlier this year on hopes related to the easing of marijuana restrictions, it is now down 66% from its 52-week high.
Is there a bullish case for Jackpot stock and is a possible rally around the corner, or is it simply a stock to avoid?
A few months ago, there were high hopes that the U.S. government would move toward reclassifying marijuana from being classified as a Schedule I substance, which is the category of heroin and LSD. If it were moved to Schedule III, as was rumored to be the case, it would open up opportunities to research marijuana more easily and ease tax burdens for multi-state operators.
As optimism grew that changes could occur, Tilray stock rose, even though it wouldn’t technically help the company since it is a Canada-based company that doesn’t sell marijuana in the U.S. (Rescheduling marijuana would mean progress, but it’s not legalization). However, any positive marijuana-related news often lifts the entire industry, and since Tilray is a leading player, it often experiences the biggest profits.
Nothing has happened in recent months, and that has taken the wind out of the recent rally in the company’s stock. At one point, it was up about 60% for the year. Now, however, the drop has once again been more than 40%, just like last year.
For years, Tilray has talked about its enormous opportunities. In 2021, CEO Irwin Simon outlined a plan for the cannabis producer to reach $4 billion in annual revenue by 2024. It depends not only on a legal market in the US but also on significant expansion into other international markets.
The company has not come close to that goal. Its revenue over the past 12 months amounted to just $831 million. Even excluding the impact of legalization in the US, management still forecasts it would reach billions in revenue in markets outside the US.