Tilray Brands (NASDAQ: TLRY) stock price has crashed hard this year, continuing a downtrend that started in 2018 when it peaked at $300. It has plunged to $1.62, bringing its market cap to over $1.37 billion.
Tilray’s performance has been in sync with other cannabis companies, which have been in a strong downward trend. The closely watched AdvisorShares Trust Pure US Cannabis ETF (MSOS) has retreated by almost 90% from its highest level in 2021.
Other popular companies in the cannabis industry have also plunged. For example, Aurora Cannabis stock has plunged by almost 100% in the last five years, bringing its valuation to about $295 million.
Curaleaf Holdings has dropped by over 62% while Canopy Growth has sunk by over 985 in the last five years. Other companies like Green Thumb Industries, Truelive, and Cronos Group have also crumbled lately.
Tilray is diversifying its business
Tilray Brands’s management is working to diversify its business from the highly volatile and relatively unproven cannabis industry.
To achieve that, the company is working to become one of the biggest players in the alcoholic beverage industry. Just last week, the company completed the acquisition of craft beer brands and breweries from Molson Coors, one of the biggest American companies in the US. It has now become the fifth-largest craft brewer in the United States.
Tilray Brands also acquired more alcoholic brands from AB InBev, the biggest alcohol company in the world. As a result, it owns brands like SweetWater Brewing, Montauk Brewing, and Alpine Beer Company.
Believe that this diversification is a good thing, especially if it is done right. It will help Tilray Brands become a more diversified company, where one segment’s weakness is offset by the other one.
Tilray’s diversification is starting to show results
The most recent financial results showed that Tilray Brands’ diversification efforts are starting to generate results.
Its quarterly revenue jumped by 25% to over $229 million. This growth was mostly driven by its alcohol business whose revenue rose by 137% to $76.7 million while its cannabis business jumped by 12% to over $71.9 million.
This means that the new alcohol business has overtaken the cannabis segment, and the trend may accelerate with the recent purchases from Molson.
The other segments had a mixed performance during the quarter. Distribution revenue fell from over $72.6 million to $65.6 million while its wellness had $15.7 million. Tilray’s wellness business is made up of brands like Manitoba Harvest, Happy Flower, and Fresh Hemp Foods.
Tilray has also made other notable improvements. Its quarterly net loss stood at over $15 million, an improvement from the $119 million it made in the same period last year. Its annual loss was $222 million, also better than the previous $1.4 billion.
Cloudy outlook dampens mood
Therefore, Tilray Brands stock price has crashed because the management issued weaker forward guidance than what most analysts were expecting.
Most analysts expect that Tilray’s revenue for the current quarter will come in at $218 million followed by $221 million in the next quarter. They also see the company’s annual revenue coming in at $914 million, up by over 15% from last year. Tilray is then expected to cross the $1 billion mark next year.
Additionally, like other cannabis companies, Tilray’s price action is mostly because of the regulatory situation in the US. Like other cannabis companies in the country, Tilray Brands stock jumped earlier this year as the US started the process of declassifying marijuana to a less dangerous drug.
It also rose as Chuck Schumer hinted that the Senate would consider a cannabis banking bill. These two events would make it easier for companies to do business in the country.
However, analysts believe that the chances of getting it through Congress will be lengthy. Also, the process of declassifying cannabis will take a long time or even die if Donald Trump wins the election in November.
Complicating the issue is a recent poll that showed that the sentiment among Americans on cannabis was deteriorating. 54% of Americans believe that marijuana has a negative impact on society, higher than 50% in 2022.
Tilray Brands stock analysis
The weekly chart shows that the TLRY Brands stock has been in a tight range in the past few months. It now sits at a make-or-break level of $1.60, where it failed to move since June last year.
This price is along the lower side of the descending triangle chart pattern. In most cases, this pattern is one of the most bearish ones in the market. Tilray has also remained below the 50-week moving average.
Therefore, there is a risk that the Tilray Brands share price will soon have a bearish breakout soon. If this happens, the stock will likely drop to the next point at $1.
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