The S&P 500’s New Record and the Impact of Germany’s Cannabis Legalization on TLRY Stock

The stock market has been on a rollercoaster ride in recent weeks, with the S&P 500 reaching a new record high on the back of strong performances from tech giants like Nvidia and Palo Alto Networks. Amidst this market volatility, the cannabis industry has been making headlines due to Germany’s decision to decriminalize cannabis for recreational use. In this article, we will explore the implications of this legalization on Canadian cannabis producer Tilray Brands (TLRY) and its stock performance.

Germany’s Decision to Decriminalize Cannabis

Germany’s parliament is set to approve the decriminalization of cannabis for recreational use for adults on February 23, 2024. This decision marks a significant milestone for the European cannabis market, making Germany the largest country in Europe to legalize cannabis. The law will allow adults to grow up to three plants for personal consumption and carry up to 25 grams of the plant.

Impact on TLRY Stock

TLRY stock has been on a downward trend since its November-ended quarterly earnings report on January 9, 2024. The stock fell below its 21-day exponential moving average and its 50-day moving average, and its IBD Relative Strength Rating weakened to a low 13 out of 99. The decline in TLRY stock has been spectacular, with the stock going public in July 2018 at $17 a share and peaking exactly at $300 in September 2018. It is now back around $1.79 a share after the post-earnings decline.

Despite the downturn, TLRY remains the Canadian market share leader and continues to add new products. With Germany decriminalizing cannabis for recreational use, some investors are wondering if TLRY stock is a bargain buy now.

Tilray’s Q2 Earnings Report

Tilray reported a smaller-than-expected loss but lower sales than estimated in its Q2 earnings report. The company reported a 7-cent loss per share for the November-ended quarter vs. an 11-cent loss for the year-ago quarter. Its quarterly revenue was a record high, but analysts expected even more. Fiscal second-quarter net sales grew 34%, up from 20% and 15% increases in the prior two quarters. The growth trend ended a streak of three declining quarters.

Tilray’s cannabis net revenue grew 35% vs. the year-ago quarter, but its alcoholic beverage net revenue growth of 117% stood out. The company reiterated its full-year adjusted EBITDA target of $68 million to $78 million, representing growth of 11% to 27% compared with fiscal 2023.

Growth Opportunities for Tilray

Tilray is focusing on new products and new geographies to drive market share. With 24 states and Washington D.C. having legalized recreational marijuana and 11 states considering legalization in 2024, there are significant growth opportunities for the company. Tilray is also bolstering its alcoholic beverage presence and developing new products for additional growth.

Recent Developments at Tilray

On January 24, 2024, Tilray announced it had finalized the acquisition of Truss Beverage from Molson Coors, increasing its beverage operations in Canada and its market share to around 40% in the Canadian cannabis beverage market. On January 4, 2024, Tilray Brands launched its new THC and CBG-infused RIFF BOOST beverages available in Canada across select regions and retailers.

Fundamental Analysis of TLRY Stock

Despite the potential growth opportunities, TLRY’s fundamentals need improvement. The company’s EPS Rating dropped to a weak 4 out of 99 following its latest quarterly report, and its Composite Rating is a dismal 13. IBD research advises investors to focus on stocks with Composite Ratings of 90 or higher.

Conclusion

In conclusion, the S&P 500’s new record and Germany’s decision to decriminalize cannabis for recreational use have significant implications for the cannabis industry and TLRY stock. While TLRY remains the Canadian market share leader and continues to add new products, its fundamentals need improvement, and the stock is not in a base or in buy range at the moment. Investors should focus on stocks with stronger fundamentals that are moving into buy zones and avoid low-priced stocks like TLRY, as institutional buying accounts for the lion’s share of stock trades.

As always, it’s important to remember that investing involves risks, and it’s crucial to do your own research and consult with a financial advisor before making any investment decisions. Stay informed and stay invested!