Tilray (TLRY) – Get the report from Tilray Brands, Inc. stocks, along with those of other cannabis stocks and even cannabis-related stocks, soared on March 24. Investors were reacting to positive news regarding the legalization of cannabis at the federal level.
The long-awaited legalization in the United States would be a milestone for cannabis stocks. Since last year, the entire industry has seen a steep decline, largely due to the lack of progress on the legalization front in the United States.
Many struggling Canadian Licensed Producers (LPs), and even profitable US Multistate Operators (MSOs), have seen their market capitalization decline by 50% or more since June 2021.
But if legalization is indeed on the horizon, Tilray, a Canadian LP, will be one of the main beneficiaries. Here’s what it would take to send stocks to highs not seen in a long time.
Cannabis legalization in sight?
During the March 24 trading session, positive news regarding the legalization of marijuana sparked some euphoria among cannabis stock investors.
It turns out that the house rules committee had scheduled a meeting for Monday afternoon, March 28th. The intention of this meeting is to prepare a bill for the federal legalization of marijuana in the United States.
Although nothing is official yet, the mere indication that the legalization of marijuana is being discussed at the highest level has already encouraged investors.
So far, 18 states and Washington, DC have legalized marijuana for adults over 21, and 38 states have legalized marijuana for medical purposes.
On the positive news, Tilray stock jumped more than 21% in the March 24 session and more than 7% after hours. The AdvisorShares Pure Cannabis ETF (YOLO) – Get AdvisorShares Pure Cannabis ETF Report jumped 3.4%. And Canadian growers Sundial Growers (SNDL) – Get the report from Sundial Growers Inc. and canopy growth (GCC) – Get Canopy Growth Corporation report jumped 22% and 11% respectively.
Amid this wave of new enthusiasm, however, it’s also important to provide some historical context. A slightly different version of this legalization bill (the Marijuana Opportunity Reinvestment and Expungement Act, or MORE Act) pass the House of Representatives in 2020.
Other bills related to the legalization and decriminalization of marijuana have also come a long way through the House in the past.
The real challenge is getting one of these bills through the Senate. It’s a much higher order, and there’s little indication at this time that the Senate has the votes or the will to pass the MORE Act, especially as Senate Majority Leader, Chuck Schumer is working on his own marijuana legalization legislation.
Tilray is on its way to becoming a major player in the United States
However, if legalization were to go through, Tilray would benefit greatly thanks to its prominent position within the industry.
Tilray is one of the market leaders in Canada, with approximately 12.8% market share. The company’s brands have shown relatively consistent performance in Canada, although it has recently lost ground to competitors.
The company also benefits from a significant presence in the European market. In fact, Tilray is the market leader in Germany, with a 20% share of the medical marijuana market. Germany is considered the biggest and most lucrative medical cannabis market in the EU, and its new coalition government looks set to pass legalization legislation in the next few years.
Tilray’s ambitious plans are to achieve global leadership in the cannabis industry. To this end, since the last months of 2020, Tilray has made strategic acquisitions and transactions. Most notable was the company’s merger with Canadian LP Aphria, which strengthened Tilray’s position in the North American market.
Focusing on the US market, Tilray has acquired a significant stake in MedMen 2021. MedMen is an American producer with 24 outlets in six US states. According to Tilray CEO Irwin D. Simon, the acquisition was a crucial step towards the goal of making Tilray the market leader in the United States as soon as legalization allows.
With the movement to legalize cannabis in the United States taking longer than expected, the company has diversified its investments into other areas, such as cannabis-infused beers and spirits.
Tilray owns SweetWater Brewing Co., a large Georgia-based craft brewer that distributes beverages across the United States. More recently, the company acquired Colorado-based Breckenridge Whiskey Distillery.
Cannabis legalization is the biggest catalyst for Tilray and most publicly traded cannabis companies. The US cannabis market is $80 billion and growing, and Tilray is poised to become a very relevant player in this market.
With its recent acquisitions and proven execution track record in Canada and Europe, Tilray could outpace some of its competitors. And after being in freefall for nearly a year, Tilary’s shares could be ripe for a turnaround. As the cannabis industry matures, there is a lot of potential for the business.
But again, it’s important to remember that nothing is close to final yet. The latest wave of pot-stock euphoria stems from a positive but not revolutionary development.
And even if legalization happens in the US, there are still plenty of hurdles for Tilray. Regulatory risks, taxes and fierce competition from other Canadian LPs (such as Canopy Growth Corp) and well-established US MSOs (such as Green Thumb, Cresco Labs, Curaleaf, Verano, Trulieve, etc.) could all contribute to slow down the business. prospects.
(Disclaimer: This is not investment advice. The author may own one or more stocks mentioned in this report. Additionally, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)