$TLRY First Step Toward Cannabis Legalization
After posting impressive Q4 financial results, Tilray Brands, Inc. (NASDAQ: TLRY) has been gaining momentum as the company’s outlook appears to be brighter than ever – especially with cannabis’ status as a schedule 1 drug currently being re-evaluated. Although full cannabis legalization may not come for years, the ongoing re-evaluation of cannabis status may be a positive step toward federal legalization. Until then, the company is continuing to expand its US presence through its portfolio of US alcoholic brands which may allow it to gain a substantial market share in the adult US cannabis market. In light of this, and the company’s improving financial situation, this could be the time to go long on TLRY stock.
TLRY Fundamentals
As things stand, TLRY is a Canadian marijuana giant that is considered the largest cannabis company in the world in terms of revenue. That being said, it also has a thriving alcohol business which provides it with substantial revenue and an extensive logistics network in the US. On that note, when TLRY acquired Montauk Brewery, it also acquired Montauk’s distribution centers which anchored its position in the US market. Currently, the company is seeking out more strategic acquisitions within the US alcohol industry as it aims for this segment to generate $300 million in annual revenues.
The Federal government is currently reevaluating marijuana’s status as a Schedule 1 drug. This in turn means that the cannabis could be rescheduled or de-scheduled. Getting de-scheduled means that cannabis will no longer be illegal. Being rescheduled, on the other hand, means that cannabis will no longer be considered a schedule one substance – meaning that cannabis research will no longer go through bureaucratic hurdles.
Rescheduling appears to be the most likely outcome, which while not ideal for the industry, could be considered a step toward legalization. In that case, the whole cannabis sector will run including TLRY stock.
There are 3 reasons it is very likely cannabis will not remain a Schedule 1 substance. The first of which is that Schedule 1 guidelines indicate that all substances within that umbrella have no medical use. This is not the case for cannabis since it is currently used to ease nerve pain and treat PTSD among other medicinal uses.
The second reason is that, according to Schedule 1 guidelines, the substance in question must have a potential for abuse. With that in mind, multiple studies have been conducted to measure the likelihood of cannabis abuse and these studies concluded that cannabis does not have a potential for abuse. In fact, one of these studies indicated that as little as 9% of cannabis users abuse the substance. The results of these studies are incomparable to other Schedule 1 substances like cocaine and heroin which have a much higher abuse rate.
Finally, cannabis is not likely to remain a Schedule 1 drug due to the growing sentiment for federal legalization. Currently, 68% of Republican voters are pro-cannabis legalization and 80% of Democrats believe Congress should move to end the prohibition on cannabis. All in all, 88% of US adults support cannabis legalization which makes the odds to be in favor of rescheduling or de-scheduling.
Due to these factors, marijuana legalization may not be far off, and when it occurs, TLRY will be ready to swoop in through its logistics network because of its thriving alcohol business. As is, TLRY is able to repurpose its existing distribution network which will help it penetrate the US cannabis market and manage the distribution of its product within the country. In this way, the company’s sales may be poised to increase significantly, and combined with its improved financial performance, profitability may not be a far-fetched dream for the cannabis giant.
TLRY Financials
According to TLRY’s 2023 annual report, its assets decreased from $5.44 billion at the beginning of the year to $4.3 billion. The reason for this decline in assets is largely attributable to declines in capital assets from $587.4 million to $429.6 million, intangible assets from $1.2 billion to $973.7 million, and goodwill from $2.6 billion to $2 billion. Meanwhile, liabilities declined from $1 billion to $977.3 million due to a decline in convertible debt payable from $196.6 million to $167.3 million despite current liabilities increasing from $280.3 million to $432.9 million.
In terms of revenue, TLRY witnessed a slight YoY decline from $628.3 million to $627.1 million. However, what is notable is the company’s gross margin improved significantly YoY from 18.5% to 23.4%. As for operating costs, the company witnessed a drastic increase from $727.2 million to $1.5 billion. However, this increase is a result of impairment increasing from $378.2 million to $934 million and a $246.3 million change in the fair value of convertible notes. For this reason, the company’s net loss increased from $434.1 million to $1.4 billion.
Technical Analysis
TLRY stock is in a neutral trend as it recently entered a sideways channel between $2.17 and $2.85. Looking at the indicators, the stock is above the 200, 50, and 21 MAs which is a bullish indication. Meanwhile, the RSI is neutral at 57 and the MACD is bearish. It is also worth noting that there is a gap near $1.7 that was formed on the company’s Q4 results which might be filled soon.
As for the fundamentals, updates regarding the rescheduling or de-scheduling of cannabis will act as a major catalyst for TLRY stock and the whole cannabis sector. Given that it is highly likely that cannabis may not remain a Schedule 1 substance, federal legalization may not be a far-fetched dream and TLRY is well-positioned to secure a substantial share of the US market thanks to its presence in that market through its alcoholic brands.
Since investing in the cannabis sector is a long-term bet on cannabis legalization, bullish investors could wait for the stock to cool down from its post-earnings run, and enter long positions when the gap near $1.7 is filled.
TLRY Forecast
With cannabis’ status as a Schedule 1 substance being put into question, TLRY stock and the whole cannabis industry may be poised to soar. As rescheduling appears to be the most likely outcome, this could be considered a pivotal step toward federal legalization. With this in mind, TLRY is well-positioned to capitalize on the eventual legalization of cannabis thanks to its familiarity with the US market due to its existing US alcoholic brands.
Given that the company may utilize the distribution networks of its alcoholic brands to distribute its cannabis products, it has the potential to dominate the adult US cannabis market once cannabis is legalized. With the company improving its financial performance significantly in Q4 and its expectations of positive cash flow for the full year 2024, TLRY stock may be poised for growth in the coming years – making it a potentially profitable long-term hold.
TLRY Fundamentals
As things stand, TLRY is a Canadian marijuana giant that is considered the largest cannabis company in the world in terms of revenue. That being said, it also has a thriving alcohol business which provides it with substantial revenue and an extensive logistics network in the US. On that note, when TLRY acquired Montauk Brewery, it also acquired Montauk’s distribution centers which anchored its position in the US market. Currently, the company is seeking out more strategic acquisitions within the US alcohol industry as it aims for this segment to generate $300 million in annual revenues.
The Federal government is currently reevaluating marijuana’s status as a Schedule 1 drug. This in turn means that the cannabis could be rescheduled or de-scheduled. Getting de-scheduled means that cannabis will no longer be illegal. Being rescheduled, on the other hand, means that cannabis will no longer be considered a schedule one substance – meaning that cannabis research will no longer go through bureaucratic hurdles.
Rescheduling appears to be the most likely outcome, which while not ideal for the industry, could be considered a step toward legalization. In that case, the whole cannabis sector will run including TLRY stock.
There are 3 reasons it is very likely cannabis will not remain a Schedule 1 substance. The first of which is that Schedule 1 guidelines indicate that all substances within that umbrella have no medical use. This is not the case for cannabis since it is currently used to ease nerve pain and treat PTSD among other medicinal uses.
The second reason is that, according to Schedule 1 guidelines, the substance in question must have a potential for abuse. With that in mind, multiple studies have been conducted to measure the likelihood of cannabis abuse and these studies concluded that cannabis does not have a potential for abuse. In fact, one of these studies indicated that as little as 9% of cannabis users abuse the substance. The results of these studies are incomparable to other Schedule 1 substances like cocaine and heroin which have a much higher abuse rate.
Finally, cannabis is not likely to remain a Schedule 1 drug due to the growing sentiment for federal legalization. Currently, 68% of Republican voters are pro-cannabis legalization and 80% of Democrats believe Congress should move to end the prohibition on cannabis. All in all, 88% of US adults support cannabis legalization which makes the odds to be in favor of rescheduling or de-scheduling.
Due to these factors, marijuana legalization may not be far off, and when it occurs, TLRY will be ready to swoop in through its logistics network because of its thriving alcohol business. As is, TLRY is able to repurpose its existing distribution network which will help it penetrate the US cannabis market and manage the distribution of its product within the country. In this way, the company’s sales may be poised to increase significantly, and combined with its improved financial performance, profitability may not be a far-fetched dream for the cannabis giant.
TLRY Financials
According to TLRY’s 2023 annual report, its assets decreased from $5.44 billion at the beginning of the year to $4.3 billion. The reason for this decline in assets is largely attributable to declines in capital assets from $587.4 million to $429.6 million, intangible assets from $1.2 billion to $973.7 million, and goodwill from $2.6 billion to $2 billion. Meanwhile, liabilities declined from $1 billion to $977.3 million due to a decline in convertible debt payable from $196.6 million to $167.3 million despite current liabilities increasing from $280.3 million to $432.9 million.
In terms of revenue, TLRY witnessed a slight YoY decline from $628.3 million to $627.1 million. However, what is notable is the company’s gross margin improved significantly YoY from 18.5% to 23.4%. As for operating costs, the company witnessed a drastic increase from $727.2 million to $1.5 billion. However, this increase is a result of impairment increasing from $378.2 million to $934 million and a $246.3 million change in the fair value of convertible notes. For this reason, the company’s net loss increased from $434.1 million to $1.4 billion.
Technical Analysis
TLRY stock is in a neutral trend as it recently entered a sideways channel between $2.17 and $2.85. Looking at the indicators, the stock is above the 200, 50, and 21 MAs which is a bullish indication. Meanwhile, the RSI is neutral at 57 and the MACD is bearish. It is also worth noting that there is a gap near $1.7 that was formed on the company’s Q4 results which might be filled soon.
As for the fundamentals, updates regarding the rescheduling or de-scheduling of cannabis will act as a major catalyst for TLRY stock and the whole cannabis sector. Given that it is highly likely that cannabis may not remain a Schedule 1 substance, federal legalization may not be a far-fetched dream and TLRY is well-positioned to secure a substantial share of the US market thanks to its presence in that market through its alcoholic brands.
Since investing in the cannabis sector is a long-term bet on cannabis legalization, bullish investors could wait for the stock to cool down from its post-earnings run, and enter long positions when the gap near $1.7 is filled.
TLRY Forecast
With cannabis’ status as a Schedule 1 substance being put into question, TLRY stock and the whole cannabis industry may be poised to soar. As rescheduling appears to be the most likely outcome, this could be considered a pivotal step toward federal legalization. With this in mind, TLRY is well-positioned to capitalize on the eventual legalization of cannabis thanks to its familiarity with the US market due to its existing US alcoholic brands.
Given that the company may utilize the distribution networks of its alcoholic brands to distribute its cannabis products, it has the potential to dominate the adult US cannabis market once cannabis is legalized. With the company improving its financial performance significantly in Q4 and its expectations of positive cash flow for the full year 2024, TLRY stock may be poised for growth in the coming years – making it a potentially profitable long-term hold.
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