Shares of Tilray (NASDAQ:TLRY) stock are climbing this morning. The company surprised investors by turning a profit in its latest quarter. The cannabis producer delivered nine cents per share as opposed to expectations for negative eight cents per share. This marked the second consecutive month that Tilray has posted positive non-GAAP earnings. The report was still mixed as revenue came in a little light at $151.9 million as opposed to the $156.64 million expected.
Another reason why Tilray is getting a lift is the announcement of a partnership with Whole Foods. This will give Tilray exclusive access to sell its innovative Hemp+ Macha and Hemp+ Supergreens powders at over 300 Whole Foods locations starting in April 2022.
Cannabis stocks in general have been getting a boost as the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) is moving through Congress. This legislation would legalize marijuana on a federal level. At this time, it appears that it will pass the House of Representatives, but adoption is doubtful in the Senate. If the midterms go the way that is being predicted, this may be the best opportunity for this legislation for another election cycle. Nevertheless, this is the ultimate catalyst for Tilray or any other cannabis stock.
It is not a surprise to investors that cannabis stocks have been a train wreck since the cannabis bubble burst in 2019. When investors realized that sustained profitability would be years away, many abandoned the sector. However, Tilray, via its merge with Aphria, offers an unprecedented production platform. The company supports over 20 brands in over 20 countries. And like many cannabis companies, the word to watch for is diversification. The company offers hemp-based foods and alcoholic beverages in addition to its cannabis offerings.
With the gap up after the earnings announcement, the easy gains in TLRY stock may be gone. Heading into earnings, analysts have a $10.31 consensus price target. However, since the beginning of the year, analysts have been delivering lower price targets. And all the price targets are below the consensus estimate. That may change if analyst sentiment becomes more bullish. Investors would be wise to wait for a confirmation as they consider a position.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.