Tilray Brands stock price remains in a freefall this year and is now trading at its lowest level since July 9 last year. It recently lost the crucial support level at $5.95, and is down by over 76% from its highest point in October last year. So, is it safe to buy the dip?
Tilray Brands stock has crashed amid rising risks
TLRY stock has plunged this week and is now at its lowest level since July last year. This retreat accelerated after the Justice Department announced that it would reschedule cannabis. This followed an executive order by President Donald Trump in January.
The DEA will hold its first hearing on these changes on June 29 this year regarding the rescheduling. If the process concludes and is successful, it will dramatically change the industry by making it easier for companies to operate.
However, the process still faces some major risks, including lawsuits, including the Smart Approaches to Marijuana (SAM). The group of prohibitionists argued that loosening restrictions violates federal law. It also argues that it will be harmful to public health.
Therefore, there is a likelihood that the ongoing legal actions will delay the rescheduling process in the long-term. For example, Joe Biden’s attempts to change the classification faced substantial delays and he exited the presidency before it was completed.
A successful rescheduling will be a good thing for the $50 billion industry that has faced multiple barriers at the federal level. Marijuana products approved by the FDA will be moved to a category with low to moderate potential abuse.
Tilray Brands, which sells several products like Mollo, Good Supply, and Redecan, does not have a major presence in the United States. It instead sells its products in over 20 countries, including in Canada and Germany.
The management has always pointed to the regulatory challenges in the US, where cannabis has been classified as a controlled substance product. It has pointed to a potential entry to the US once the regulatory environment changes. The company recently said:
“Tilray stands ready to partner with regulators and healthcare providers to responsibly expand access to medical cannabis and help shape the future of this industry in the United States.”
Beverage business is still struggling
Tilray Brands has been growing its business through acquisitions. Precisely, it has spent millions of dollars buying beverage brands from companies like AB InBev and Molson Coors. Its goal is to become a major player in the alcohol business.
However, there are signs that the business is still struggling as beer consumption drops globally. For example, the most recent financial results revealed that its beverage revenue dropped to $42.6 million in the third quarter. It had made over $55.9 million in revenue in the same period a year earlier. Also the gross margin continued falling, reaching 32%.
The division will likely remain under pressure as global beer consumption growth stalls. Data shows that the global beer market stood at $986 billion today, and is expected to grow gradually in the coming years to hit $1.3 trillion by 2032.
Tilray Brands stock price technical analysis
TLRY stock chart | Source: TradingView
The daily chart reveals that the TLRY stock price has crashed in the past few months. It has dropped from $9.30 in April to $5.41 today, its lowest level in months.
The stock recently plunged below the key support level at $5.98, its lowest level in March this year. Moving below that level confirmed the bearish outlook.
Still, the stock is not yet oversold, with the Relative Strength Index (RSI) trading at 33, its lowest level since March 31st. Therefore, the TLRY share price has more downside to go in the near term, potentially below $5.
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