Tilray Brands (NASDAQ: TLRY) stock price has suffered a harsh reversal as I predicted on May 1st as cannabis shares surged. It has retreated to $1.98, down by over 20% from its highest level this month and 33% lower than its 2024 high.
Tilray is facing major headwindsCannabis stocks surged hard earlier this month as investors cheered the regulatory situation in the United States.
Senator Chuck Schumer, the majority leader, noted that he would focus on the cannabis bill banking bill that would solve one of the most challenging issues in the industry.
While cannabis is legal in many states, the reality is that most mainstream banks always avoid companies in the industry. They note that the cannabis is still illegal in the federal area and that cannabis exposes them to regulatory risks.
Lack of mainstream banking has had many challenges for companies in the industry, which rely on smaller banks, which tend to be more expensive. In some cases, these firms handle their businesses using cash.
Cannabis stocks also jumped after the Drug Enforcement Administration (DEA) said that it would declassify cannabis as a low-risk drug. This is also another positive move for Tilray Brands and other firms in the industry, but the change has a long way to go.
Tilray Brands published strong results that missed analysts’ estimates in April. Its revenue for the quarter jumped to $188 million, up from $145 million a year earlier. This growth was mostly because of its beverage business, whose revenue soared by 145% to $54 million. Its cannabis revenue rose by 33% to $63.4 million.
Tilray has been focusing on diversifying its business from the volatile cannabis sector. In line with this, it acquired eight beer brands from AB InBev in 2023 to boost its alcoholic portfolio.
While Tilray Brands published strong financial results, its guidance was weaker than expected. It expects that its adjusted EBITDA for the year will be between $60 million and $63 million in its financial year. The statement added:
“The Company no longer expects to generate positive adjusted free cash flow for the full fiscal year 2024, due to delayed timing for collecting cash on various asset sales.”
Altogether, I believe that Tilray Brands is a better cannabis stock than most of its competitors because of its diversified income stream. It also has a strong balance sheet with over $226 million in liquidity.
Most importantly, the company has no cannabis presence in the United States, meaning that it has room to grow its medical marijuana business there if it receives federal legalisation in the country. It will leverage its expertise in Canada and Europe to gain that market share.
Tilray Brands stock price forecast
Turning to the daily chart, we see that the TLRY share price has been highly volatile in the past few weeks. The Average True Range (ATR), a popular volatility indicator, has risen from a low of March to its highest level in September last year.
It is consolidating at the 50-day and 100-day Exponential Moving Averages (EMA). Also, the stock has moved slightly above the crucial support level at $1.60, its lowest point on March 14th. It is also higher than $1.50, its lowest swing in June 2023.
Therefore, at this stage, I suspect that the Tilray Brands stock price will continue its volatility in the coming weeks. In this case, the key support and resistance levels to watch will be at $1.60 and $2.50.
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