Tilray Stock Shows Signs of Weakness
I’ve had a mixed relationship with Tilray Inc (NASDAQ:TLRY) over the years. Initially attracted to the first marijuana stock to go public on a major U.S. exchange, I quickly saw that, beyond that early excitement, TLRY stock didn’t offer much substance.
And it appears that, in 2021, we’ve been seeing the same story play out again for Tilray stock. Only this time, I was taken in by it.
I’ll admit, dear reader, that I called this one wrong. TLRY stock is the same as it always has been: able to generate big headlines but unable to follow it up with anything substantial.
Much like when it initially hit the market, Tilray stock is now hemorrhaging value, with late investors taking the brunt of the losses.
That isn’t to say there’s no way to make money from Tilray Inc—far from it. If you had invested in TLRY stock a year ago, you would have gained more than 132% as of this writing.
Chart courtesy of StockCharts.com
If, on the other hand, you had gotten in on Tilray stock only three months ago, you would be down by about 37%.
There was a high point of more than 1,200% gains in February.
In other words, investors who sold high made a lot of money. If they bought shares of Tilray Inc at the wrong time, however, they faced dizzying losses.
Chart courtesy of StockCharts.com
The first TLRY stock rush was encouraged by Tilray’s inclusion on the Nasdaq.
As you’d expect, the hype surrounding that debut—mixed with the general excitement about marijuana stocks back in 2018, just as legalization was set to hit Canada—was a perfect storm for a wild, volatile, dangerous run.
And that’s exactly what happened with Tilray Inc.
I predicted that run pretty much to a tee. I foresaw the huge rise and encouraged day traders and more active investors to consider Tilray stock on the upswing (knowing that a downswing could very well be imminent).
I also quickly saw that there was nothing of substance propping up TLRY stock’s price as it reached awe-inspiring heights. Therefore, I discouraged long-term investors and people who were looking for safer investments from jumping in on Tilray Inc.
The marijuana stock market is never totally devoid of volatility, but there were certainly more solid picks out there back then, and there are certainly more solid picks out there right now.
So, what generated the second surge in Tilray stock’s price?
It was Tilray Inc’s acquisition of Aphria Inc that made it the largest legal cannabis producer by sales. (Source: “Cannabis Production Company Tilray Closing its Offices, Facility in Nanaimo, B.C.,” CBC, September 20, 2021.)
That, to me, was very exciting, and not just for the short term.
Sure, Aphria Inc and Tilray Inc have both had their share of troubles in the past, but I have an expansionist mindset when it comes to pot stocks. That is, I believe bigger is almost always better in the marijuana industry.
That mindset has often been proven correct, with winners like Canopy Growth Corp (NYSE:CGC) and Curaleaf Holdings Inc (CNSX: CURA, OTCMKTS:CURLF) both having netted returns exceeding 50% (in CGC stock’s case, hundreds of points) over the years.
But with TLRY stock, it just didn’t come together. And I don’t know how Tilray Inc can pull out of its nosedive.
I’ve stuck up for pot stocks like Canopy Growth stock through downturns before, but Tilray stock is different; this was supposed to be its chance at redemption.
And with Tilray so clearly bungling the forward momentum from its merger to now, I don’t see any promise left in TLRY stock for long-term investors.
Even Tilray Inc’s victories have been marked by humiliation. Recently, a lawsuit against the company was dismissed. Shareholders had argued that Tilray had artificially inflated the value of a marketing and revenue-sharing agreement with Authentic Brands Group Inc. (Source: “Cannabis Producer Tilray Wins Dismissal of Shareholder Lawsuit in New York,” Reuters, September 27, 2021.)
Good news that it was dismissed, right? Well, it is until you read what the judge said.
“Tilray certainly appears to have overestimated, by orders of magnitude, both the value of the ABG Agreement and the likelihood of fortuitous regulatory change. But being wrong – even embarrassingly so – is not the same as being dishonest,” wrote U.S. District Judge Paul Crotty. (Source: Ibid.)
Translation: the company is being mismanaged.
And while there has been some injection of new talent in Tilray Inc, ultimately, it doesn’t seem to be a company built for success.
As Tilray closes facilities in western Canada and spirals toward further losses, long-term buy-and-hold investors probably shouldn’t take a chance on Tilray stock. There are far better options in the marijuana stock market right now.
But for day traders who want to make money on the volatility, or investors who are keen on shorting runaway stocks, TLRY stock certainly shows promise.
There’s simply no denying that Tilray stock has twice proven itself incapable of leveraging momentum into serious long-term gains.
Say what you will about some of the past fumbles in the marijuana industry, but few can compare to TLRY stock’s two instances of sky-high gains and bedrock-cracking losses.
I called one right and one wrong, and now it’s probably time for investors to focus on pot companies with far more promise, competency, and a proven ability to succeed.
For anyone investing with money they can’t afford to lose, it’s probably best to steer clear of Tilray Inc.