Why Tilray Shares Have Been Sinking This Week

What happened

It’s been an interesting couple of weeks for investors of Canadian cannabis and alcohol seller Tilray ( TLRY -0.93% ). Followers of the marijuana sector watched and celebrated when the U.S. House of Representatives passed a federal legalization bill last week. And Tilray stock popped on Wednesday after it reported a surprise profit in its fiscal third-quarter 2022 earnings report for the period ended Feb. 28. But overall for this week, Tilray shares have tanked. As of midday trading on Friday, its stock has dropped about 12.5% since last Friday’s closing price, according to data provided by S&P Global Market Intelligence

So what

The solid earnings report aside, several factors led investors to shed shares of Tilray this week. While the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act was passed by the U.S. House of Representatives last week, the reality is that, like the last time it passed, it is unlikely to get passed in the Senate. Industry backers at least hope for a Senate vote this time, as it never made it to the floor last time. 

A hand holds a bag of marijuana buds and taps a credit card to a point-of-sale machine.

Image source: Getty Images.

More generally this week, the Nasdaq Composite index has also been down, and with it many more speculative growth stocks including those in the cannabis sector. 

Now what

In its earnings report, Tilray announced a surprise profit of $0.09 per share, though some of that was due to non-operating income. Net revenue grew 23% compared to the year-ago period. Cannabis revenue increased 32% and beverage alcohol revenue jumped 64% year over year.

But investors know progress with legalization in the U.S. is what could really move the needle for Tilray and other cannabis stocks. It’s more likely the bill will at least get a vote this time around. Marijuana Moment reports that Senate Majority Leader Chuck Schumer hopes to submit a comparable bill named the Cannabis Administration & Opportunity Act (CAOA) for consideration by the end of this month. Schumer also says he and other Democratic lawmakers have been working with Republicans to gauge what will be needed to potentially pass the bill. 

Investors reacted to Tilray’s quarterly report showing support for progress in the business. But progress toward federal legalization of marijuana in the U.S. is a more impactful catalyst right now, and investors seem to think the MORE Act is unlikely to pass in the Senate again. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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