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Is Tilray Stock About to Stage a Comeback?

With a groundbreaking announcement regarding cancer-related research, TLRY has given itself and the industry credibility

Ironically, while cannabis has analgesic properties, stakeholders of cannabis stocks know only one attribute: pain. And within this green industry, one of the most negatively impacted is medicinal cannabis specialist Tilray (NASDAQ:TLRY). On a year-to-date basis, Tilray stock has dropped a staggering 70%.

With Profitability Nowhere in Sight, Tilray Stock Has Further to Fall
Source: Jarretera / Shutterstock.com

However, on the Oct. 24 session, the company finally received some good news. On that day, management revealed that it had successfully imported medical cannabis into the U.S. The imported materials support a clinical trial which studies the effect of cannabis for patients suffering from disorders associated with breast cancer treatments. As expected, TLRY stock skyrocketed on the news, closing up nearly 8%.

Specifically, scientists from the Columbia University Irving Medical Center in New York are evaluating patients of taxane-induced peripheral neuropathy (TIPN). This nerve damage disorder affects more than 67% of women who undergo breast cancer treatment. Because of the extremely high incidence rate, a cannabis breakthrough will surely drive up Tilray stock.

That said, not everyone cares for TLRY stock. For instance, The Motley Fool contributor Keith Speights mentions that the news doesn’t mean much for TLRY for the time being. Certainly, I can appreciate why Speights takes this cautionary view.

For one thing, the legal cannabis industry has turned into a credibility-suck. Essentially, the sector has turned into all narrative, but no substance. This potential-but-no-profit dynamic has hurt investments like Tilray stock.

More critically, evidence for cannabis’ therapeutic efficacy is growing. However, a hype train surrounds the plant, causing medical professionals to urge patients to keep their optimism in check. Thus, Speights is correct: the news doesn’t fundamentally impact TLRY stock.

Still, down the road, this is a breakthrough investors shouldn’t ignore.

Tilray Stock Wins from Rising Legitimacy

On the surface, the news isn’t really that groundbreaking. After all, pharmaceutical companies are always tinkering with new ideas to in the hopes of developing new therapies. Mere participation in a study doesn’t usually net them investor dollars.

Of course, TLRY stock differs fundamentally from most other healthcare-related names. In this case, the importation of cannabis and participation in the TIPN study gives Tilray and the cannabis industry legitimacy.

First, the transportation of cannabis across international borders is a huge deal. Under the Agriculture Improvement Act of 2018 (colloquially known as the “farm bill”), industrial hemp and hemp-derived products are legal under federal law. But the farm bill doesn’t permit the transfer of cannabis from foreign countries.

Thus, with Tilray importing cannabis into the U.S., it represents a possible thawing in American marijuana laws. Additionally, TLRY has a history of successfully importing the maligned plant. Overall, I view this development as a net positive for Tilray stock.

Second, the fact that high-level medical research toward cannabis is being conducted is a win for the industry. And we’re not talking about healing some random boo-boo. Instead, the side effects of chemotherapy are harsh enough to warrant alternative ideas. According to Harvard Health Publishing:

Chemotherapy inhibits the production of new blood cells. When white cell counts get too low, the body loses the ability to fight infection. That’s why a common side effect of chemotherapy is increased susceptibility to infections. These infections can be very serious and often require hospitalization.

While it’s a big “if,” should cannabis be proven effective in cancer-related therapies, it would dramatically bolster beaten-down sector players. But Tilray stock would be among the biggest winners for its medicinally focused endeavors.

Cannabis Undergoing a Perspective Makeover

Over the next few years, the marijuana market has two tailwinds. The biggest one is “Cannabis 2.0,” or the legalization in Canada of derivative products, such as vapes, edibles and beverages. Another tailwind is changing public perceptions about cannabis.

Obviously, for recreational-centric companies, the former factor is the most relevant. But for TLRY stock, the latter trend represents a significant selling point.

We all know that among those who support marijuana legalization, the most enthusiastic are millennials. But with cannabis products like cannabidiol (CBD) making inroads into wealthy, older and conservative strongholds like the game of golf, the controversial plant is becoming less so across demographics.

Here, Tilray has the best product evangelism opportunity. Older people simply have more aches and pains than younger folks and are more susceptible to disease. However, medicinal marijuana offers a natural, holistic therapy. Thus, walls will eventually come down, boosting the longer-term profile of Tilray stock.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2019/10/is-tilray-stock-about-to-stage-a-comeback/.

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