Why isn’t Tilray stock in the green today?

Tilray Brands (NASDAQ:TLRY) just released its fiscal 2024 third quarter results, and there’s nothing particularly unpleasant about the data. Nonetheless, Tilray shares are down 18% this morning, and investors may be wondering if there’s a best deal to be made here.

Or maybe Tilray stock is “cheap for a reason,” as the old saying goes. Is the market aware of Tilray Brands’ future problems?

As always, I encourage investors to rely on actual data rather than the fickle psychology of short-term traders. That said, it’s important to find out why the market decided not to get involved with Tilray stock today.

Blue Chip Canna Business

Every market sector has blue chip companies and stocks, including the cannabis products sector. Perhaps the most eventful cannabis blue chip a decade ago was Canopy Growth Corporation (NASDAQ:CGC).

But the canopy is no longer the 800-pound gorilla in the room. The best blue chip cannabis company would certainly be Tilray Brands, which owns Aphria, Hexo, and Truss Beverages Company.

Aphria was a sizable canna business in its own right, and Tilray is now a global behemoth among cannabis companies. So if Tilray is thriving, that bodes well for the sector as a whole.

Tilray and the rest of the cannabis market seemed to be thriving in 2018. During that time, it felt like full legalization in the United States was just around the corner. Commentators have also been buzzing about so-called Cannabis 2.0, where producers like Tilray are expected to make money from ancillary cannabis products (aka “derivatives”) like vapes and edibles.

As a result, Cannabis 2.0 is more hype than reality. The secondary cannabis product did not turn out to be a big seller as some investors had hoped. Moreover, there has been no major wave of cannabis decriminalization in the United States.

As a result, Tilray stock plummeted from $300 in 2018 to $1.60 in mid-March. It was a huge stock price crash for canna wealth hopefuls.

But Tilray stock has been on the rise over the past few weeks, bouncing from $1.60 to $2.59 before crashing this morning. To some extent, the stock’s rise can be attributed to Tilray’s recent expansion of its cannabis brand.

But the main catalyst may be the resurgence of hopes for full cannabis legalization in the United States and elsewhere. Germany has decriminalized cannabis for personal use, and the Canadian government is considering cutting excise taxes on cannabis producers. Moreover, U.S. Vice President Kamala Harris recently stated that she favors reclassifying marijuana.

Among other things, legalized marijuana use for recreational purposes will be on the ballot in Florida in November. So, considering the aforementioned facts and catalysts, it seems like a perfect storm is brewing and Tilray stock should fly higher.

Tilray inventory tanks despite solid quarter

Additionally, Tilray just released its fiscal 2024 third quarter financial results, and there’s plenty of fodder for the bulls. Rather, Tilray’s results point only to growth and improvement.

Here’s what investors need to know: First, the company’s net revenue rose about 30% to $188.3 million. A particular highlight of the quarter was Tilray’s Beverages-Alcoholic Net Revenue, which increased 165% to $54.7 million. So perhaps a cannabis derivatives renaissance could happen in 2024, even if it didn’t happen in 2018.

At the same time, Tilray’s main business, cannabis production, also brings a strong revenue stream. Notably, net revenue from the company’s cannabis segment increased 33% to $63.4 million in the third quarter of 2024.

Additionally, Tilray’s adjusted gross profit increased 17% to $51.6 million. To be honest, I couldn’t find anything in the company’s quarterly results to justify dropping the stock today. Tilray managed to reduce its net income loss from $1.2 billion a year ago to $105 million in the fiscal third quarter.

This begs the question of why Tilray is down 18% this morning. I think it’s just a hangover after the party since the stock price has been soaring over the last 3 weeks.

But multi-year Tilray stock is still down significantly. The company appears to be making progress toward profitability, and there may be changes in terms of cannabis laws, although there are no guarantees. So, there’s still a long-term downtrend left, and cannabis bulls might consider picking up a few Tilray shares for a small speculative position.