Here’s why Tilray Brands, Canopy Growth, Curaleaf stocks have crashed

Cannabis stocks have crashed hard this year as concerns about the industry continued. The AdvisorShares Pure US Cannabis ETF (MSOS) stock has plunged by almost 14% this year and is down by over 46% from its highest point this year. 

Similarly, the Amplify Seymour Cannabis ETF (CNBS) and the ETFMG Alternative Harvest ETF (MJ) have retreated by more than 37% from the year-to-date high. This price action means that cannabis stocks have erased most of the gains they made a few months ago.

Tilray Brands (TLRY) stock price has fallen by over 26% this year and is down by over 42% from the year-to-date high. It has become a fallen angel as the company, which was trading at over $67 in 2021 is now a penny stock that trades at $1.70.

Canopy Growth (CGC) share price has also fallen from $565 in 2021 to $5.29 while Curaleaf Holdings (CURLF) has retreated from a record high of $18.34 to $2.75. Other large companies like Verano Holdings (VRNOF), Cronos Group (CRON), and Cresco Labs (CRLBF) have also slumped. 

US cannabis reclassification to take time

Cannabis stocks surged hard earlier this year because of the rising regulatory clarity in the United States. 

In May, President Joe Biden and the Justice Department moved to reclassify cannabis to a less dangerous drug while also acknowledging its medical benefits.

That was an important step and it came a few years after the Supreme Court ruled that states could make cannanis legal.

What has not changed since then has been that the Drug Enforcement Administration (DEA) has maintained its classification of the product. A key unintended consequence of this classification is that many mainstream banks still don’t offer services to cannabis companies.

Additional, it has become more difficult for companies in the industry to move their products between state lines. 

Therefore, while Biden’s statement was a good one for the industry, these stocks have plunged because of what follows next. 

After his statement, the proposal will be reviewed by the Office of the Management of Budget (OMB) and then a lengthy publi comment review. Finally, it will move to an administration judge, meaning that it will take a lengthy process. 

At the sam time, the process will depend on who wins the November election. If Donald Trump wins, then, there are high chances that he will end the process.

Cannabis banking regulation stuck

Cannabis stocks also surged because of the positive statement by Chuck Schumer, the Senate Majority Leader, who committed to table a cannabis banking bill. 

So far, he has not done it and there is a high chance that he will not since the election will happen in November. 

The market realizes that even if it passes the Senate, which it needs 60 votes, there is zero chance that the House Speaker, Mike Johnson, will bring it to the House of Representatives. 

Such a bill would pass only if the Senate and the House of Representatives are fully controlled by Democrats and if the President is a Democrat.

Tilray Brands, Curaleaf, and Canopy Growth results

The three cannabis stocks have also crashed because of their relatively weak financial results, which have led to substantial concerns about the industry.

The most recent financial results showed that Tilray Brands revenue increased by 25% last quarter to $229 million. This growth, however, while good, was mostly because of its acquisitions. 

Last year, the company acquired several beer brands from AB InBev and this month, it bought four brewerises from Molson Coors. The firm aims to become a more diversified company with a presence in the cannabis and alcoholic beverages. 

Its cannabis revenue rose by 12% to $71 million because of its buyout of HEXO and Truss. For the year, Tilray Brands had a net loss of over $220 million. 

Curaleaf, on the other hand, reported net revenues of $343 million in the last quarter, a 2% increase from what it made a year earlier. It also made a big loss of over $48.9 million. For the six months to June, revenue rose by 2% to $681 million while its loss was $97.2 million.

Canopy Growth also demonstrated that the cannabis business was slowing. Its net revenue came in at $66.2 million, a 135 drop from the same period in 2023. Its net loss was over $129 million while its free cash flow was minus $55.7 million.

Therefore, these results demonstrate that the cannabis industry is going through a rough patch, and I believe that regulations are not to blame. I also believe that reclassification and the cannabis banking bill will not supercharge this industry. For one, anyone who needs cannabis products in the United States and Canada can easily get it. 

The industry is facing challenges like stiff competition and the fact that demand is not as high as what analysts were expecting.