Tilray Brands stock price crashed to its lowest level since August last year despite the recent US policy change that opened the door to its expansion in the country.
TLRY dropped to $5.6, much lower than the year-to-date high of nearly $10. This article explores some of the top reasons why the stock has plunged.
Tilray Brands stock has dropped as investors sell the cannabis reclassification news
TLRY stock price went parabolic in April after the Justice Department and the FDA announced that they were reclassifying cannabis into a less dangerous drug.
Such a move was good for Tilray, a company that has no cannabis operations in the United States.
In recent statements, the management has hinted of a possible US entry when business conditions improve.
Therefore, the stock has crashed as investors sell the news.
This is a common situation where investors buy an asset before or immediately after an important news event and sell it when the news event happens.
In this case, the cannabis reclassification was already priced in by market participants.
At the same time, there is a likelihood that the court will reverse the decision, noting that it did not follow the right procedure. Some interested groups have filed a lawsuit seeking to reverse it.
Other cannabis stocks remain on edge, with the AdvisorShares Pure US Cannabis ETF (MSOS) trading at $5.25, down from the year-to-date high of $5.57.
The beverage business is still struggling
Tilray Brands has been diversifying its business in the past few years as it seeks to offset the weakness of the cannabis industry.
Its approach has been to become a major player in the alcohol industry.
It has made some major acquisitions in the past few years, including from companies like AB InBev and Molson Coors.
The challenge, however, is that these efforts are not paying off as alcohol consumption drops.
Its recent results showed that the beverage business made $42.6 million in revenue, down from $55.9 million in the same period a year earlier.
Its gross profit margin dropped to 32% from the previous 36%.
Growth through acquisitions concerns
Tilray Brands stock price has also dropped because of the management’s approach of growth through acquisitions, essentially in the international business.
Its recent results showed that its revenue rose by 11% to $206 million. Its international business grew by 73% during the quarter.
It recently acquired BrewDog and Lyphe Group.
At the same time, Tilray continues to lose substantial sums of money. Its total loss narrowed to $25.2 million in its third quarter.
Tilray stock technicals have contributed to the crash
TLRY stock chart | Source: TradingView
Technicals have also contributed to the ongoing Tilray Brands stock crash this year.
It has remained below all moving averages, and most recently, it dropped below the important support level at $5.93, its lowest level on March 30th this year, invalidating the forming double-bottom pattern.
There are signs the stock found rejection at the 200-day Exponential Moving Average.
Therefore, the most likely Tilray stock forecast is bearish, with the next important target being at $4.
The bearish outlook will become invalid if the stock moves above the 200-day moving average at $8.65.
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