Shares of Tilray (NASDAQ:TLRY) are up 16% since the vice presidential debate on Oct. 7. The reason has to do with a statement that got cannabis bulls excited. However, this is a year when words are allowed to mean just about whatever we want. So, it’s important you don’t become confused at what may really happen with Tilray stock.
Let’s review what happened. Tilray stock bounced sharply higher (and on pretty good volume) when the Democratic Party’s vice-presidential nominee, Sen. Kamala Harris, said that a Biden administration would bring about the decriminalization of marijuana.
So why shouldn’t champagne corks pop? Why shouldn’t long-suffering cannabis investors shoot off fireworks?
Because words still matter. And decriminalizing marijuana does not legalize it. It’s a distinction with a rather large difference. InvestorPlace contributor Larry Ramer predicts there is probably less than a 50% chance that cannabis will be legal in the United States by 2022.
In this case, decriminalizing marijuana sounds like a Biden administration will take a hands-off approach to marijuana at the federal level. They will ensure you can’t be put in jail for possession of it. But by not promising to outright legalize it, it will still be left up to the states.
And that will continue in November. At least five states have ballot proposals to legalize marijuana for medical and/or recreational use. But for the relatively near term, we’re still looking at a crazy quilt approach to legal cannabis in the United States. And that’s where Tilray bulls have to be careful.
What If Trump Wins?
No matter how you view the president’s chances, any sentient person has to consider the possibility that President Donald Trump could be re-elected. But the president isn’t really the issue. It’s the Senate. It would seem unlikely that Trump could be re-elected without the Republican Party maintaining control of the Senate, but who knows?
And if the Senate swings Democrat, it could create a favorable legislative environment for legalizing cannabis. The question would be if not legalizing pot will be a hill the president chooses to die on. My guess is he likely will not.
Listen To What Is Not Being Said
Normally I advocate for investors to pay attention to what a company says when it releases earnings. In the case of Tilray, I would amend that slightly. It’s important for you to listen to what the company is not saying. Because that is speaking volumes.
In the most recent earnings report, chief executive officer Brendan Kennedy did his level best to paint an optimistic picture for investors. And the company did have a year-over-year gain of almost 10% in revenue. But the bottom line was a different story. The company posted a loss of 65 cents per share, which was double on a year-over-year basis.
But what makes it worse as InvestorPlace’s David Moadel points out, are the reasons Kennedy gave for the lackluster performance. Because they sounded a bit like excuses. And if there’s one thing that cannabis investors are growing weary of it’s the blame game.
However, that’s partly the fault of the cannabis investors themselves.
Tilray Stock Seems So Close Yet So Far
The cannabis story continues to be a case of so close, yet so far. And for many companies, they may be running out of time. Still, it’s a sector that continues to draw the attention of many investors, particularly the millennial Robinhood investors, who are banking on legalization sooner than later.
All I would say is be very careful when investing in Tilray stock, or any cannabis stock for that matter. Canada has not been the success that the major cannabis companies were hoping for. Part of that is because you can’t create a population that doesn’t exist. And second because the black market is still undercutting prices.
Either way, you can hold to the idea that the cannabis sector will be a great investment someday. But there’s really no denying that someday is not today.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.