Tilray Brands stock continues its downward spiral: buy the dip or sell the rip?

Tilray Brands stock continued its strong downtrend and is hovering at its lowest level since June last year. TLRY has slumped by 57% this year, mirroring the performance of other cannabis stocks like Green Thumb Industries, Truelive Cannabis, and Curaleaf. So, is it safe to buy the Tilray stock dip?

Why Tilray Brands stock has plunged

The TLRY stock has been in a strong sell-off this year as investors wait for more details on cannabis reclassification in the United States.

President Donald Trump signed an executive order directing the Department of Justice (DoJ) to expedite the rescheduling of marijuana from Schedule 1 to Schedule III of the Controlled Substances Act. 

A few months later, in April, Acting Attorney General Todd Blanche, issued the final order moving FDA-approved marijuana products and state-licensed medical marijuana to Schedule III. The DEA, on the other hand, held an administrative hearing to decide whether marijuana should move to Schedule III. The post-hearing briefs are now due on August 17, after which a judge will issue the final recommendation.

Tilray Brands, a Canadian company, has maintained that it will be open to expanding its business to the United States if the regularity clarity emerges. Such a move would be bullish for the company because its international business is one of the fastest growing ones. In a statement, the company said:

“Tilray has already developed a blueprint for a U.S. Tilray Medical platform that is focused on research, education, cannabinoid-based medicine development, patients and compliant medical cannabis access rather than adult-use retail.”

Tilray’s beverage business continues struggling

The TLRY stock price has dropped as the growth of its beverage business slows. The most recent results showed that its total revenue jumped by 11% in the fourth quarter, helped by some of its acquisitions. It acquired companies like BrewDog and Lyphe, which likely contributed to its growth.

The beverage business made $254 million, up by 6% YoY, while its cannabis jumped by 6% to $268 million. Its distribution revenue rose by 21% to $327 million, while the wellness division jumped by 9%. The company made a net loss of $105 million, driven mostly by non-cash charges.

On the positive side, the management expects the adjusted EBITDA for the year ending May next year to be between $68 million and $75 million. That will represent a double-digit growth rate compared to the last fiscal year.

TLRY stock technical analysis

Tilray Brands stock chart | Source: TradingView

The daily chart shows that the Tilray Brands stock has been in a strong sell-off in the past few months and is now at its lowest level in over 52 weeks. It recently dropped below the key support level of $5.96, its lowest level in March this year.

It has slumped below the 50-day Exponential Moving Average (EMA). Also, the Relative Strength Index (RSI) has continued falling, forming a descending channel. It is hovering slightly above the oversold level.

Therefore, the most likely scenario is where the stock rebounds in the coming months as investors start buying the dip. If this happens, it will likely rebound to the key resistance at $5.96, which is about 52% above the current level.