Tilray Brands stock eyes a rebound despite cannabis rescheduling delay

Tilray Brands stock price has gone nowhere in the past few days as investors waited for the next catalyst after the rescheduling hype faded.

TLRY was trading at $7.95 on Tuesday, a range it has remained in the past few days.

It remains 65% below the highest point in October last year, and has formed a double-bottom pattern pointing to a rebound.

Tilray is facing headwinds and tailwinds

Tilray Brands stock has moved sideways in the past few weeks, moving from last October’s high of $23 to the current $7.93.

This consolidation happened as the hype surrounding the rescheduling of cannabis by the Trump administration waned.

The administration has not made any major announcement on the rescheduling since then.

A decision to reschedule cannabis to a less dangerous drug will help companies in the industry to operate better.

In Tilray’s case, the rescheduling will help it to launch its operations in the United States, a country in which it has no presence. 

At the same time, the most recent results showed that some of its businesses are struggling.

The most notable weakness is in its beverage business, which the company has been assembling in the past few years. 

The alcoholic beverage business is not doing well globally, as we wrote in this report on Diageo.

Its beverage revenue dropped to $50.1 million from $63.1 million in the same period a year earlier. The gross margin also retreated to 31% from the previous 40%.

Some parts of Tilray’s business are improving

On the positive side, other parts of Tilray’s business are doing modestly well. Its cannabis revenue rose by 3% to $67.5 million, helped by its international business.

This growth may continue after its expansion in Italy. Its gross margin rose to 39% from the previous 35%.

At the same time, it distribution revenue jumped to $85.3 million, its best quarter.

This growth pushed its gross profit to over $11 million, with margins hitting 13%.

Most importantly, the company narrowed its losses in the last quarter. Its net loss narrowed to $41 million from the $43 million. Therefore, there is a likelihood that it is moving towards profitability.

Additionally, the company continued to improve its balance sheet. Its cash balances rose to over $291 million, while its total debt reduced by $4.1 million. 

Tilray Brands now expects that its annual EBITDA for the current fiscal year will be between $62 million and $72 million. 

Tilray Brands stock technical analysis

The daily timeframe shows that the TLRY stock has retreated in the past few months.

It has retreated from a high of $15.5 in December to the current $7.9.

A closer look shows that the stock has formed a double-bottom pattern at $6.96 and a neckline at $15.5. A double-bottom is one of the most common bullish reversal sign in technical analysis.

The two lines of the MACD indicator have formed a bullish reversal pattern.

Therefore, the stock will likely rebound, potentially to the 100-day moving average at $9.47.

On the other hand, a drop below the double-bottom point at $6.97 will invalidate the bullish outlook and point to more downside to $3.6.