Tilray stock continued its recent rally, hitting its highest since Oct. 20 ahead of President Donald Trump's potential cannabis reclassification executive order.
summary
- Tilray Brands shares rose as President Trump prepared to sign an executive order reclassifying marijuana.
- This reclassification moves cannabis from a Schedule 1 drug to a Schedule 3 drug.
- Stocks may continue to rise, but they will face further headwinds in the short term.
Tilray Brands (TLRY), a major player in the cannabis industry, hit a high of $15.71. This surge pushed its valuation to more than $1.7 billion.
At last check, the stock is trading at around $13.05 per share, an increase of around 240% over the past six months.
President Trump has hinted that he will sign an executive order moving marijuana from Schedule 1 to Schedule 3. The move will make it easier for companies to sell cannabis and its products in the United States.
It will also help the Tilray brand establish a presence in the country, either organically or through acquisition. Additionally, the company has a strong balance sheet, which could be leveraged to plan acquisitions.
Still, there are potential risks that could impact Tilray stock and the stocks of other cannabis companies. First, President Trump's executive order does not automatically change the cannabis sales schedule. Instead, it must go through a lengthy process that includes public comment.
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Most importantly, it is likely to face lawsuits because opponents are likely to sue. This is what derailed Joe Biden's efforts to reclassify the product during his first term.
Second, the schedule changes do not address other challenges facing cannabis companies in the United States. For example, companies in this industry will still face the banking challenges they have always had. This will only change if the House and Senate pass a cannabis bill.
Third, Tilray stock soared ahead of the executive order rescheduling the date. Therefore, it is likely to fall after the event as investors sell the news and wait for the next trigger.
Additionally, the company's pivot to the beverage industry hasn't been going well. TLRY said in a recent report that the division's revenue fell to $55.7 million from $56 million a year earlier. Gross profit margin also fell from 41% to 38%.
Tilray stock technical analysis
TLRY stock price chart |Source: TradingView
According to the daily chart, TLRY stock bottomed at $7 on December 4th and has now reached a high of $15.7. It rebounded after forming a descending wedge pattern, which is a bullish reversal sign.
It formed a bullish gap on December 11th and is currently above the 50-day and 100-day exponential moving averages. The Fibonacci retracement 50% level has also been surpassed.
The relative strength index is approaching the overbought level of 70. Therefore, stock prices may continue to rise prior to the rescheduling and then fall back. If this happens, it could lead to a pullback to the $10 support.
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