Tilray stock price has just lost a key support: is a crash to $5 coming?

Tilray stock price has plummeted and lost crucial support as demand for cannabis companies wanes.

TLRY dropped to $6.7 on Wednesday, its lowest level since August last year.

It has slumped by 72% from its highest level last year.

Tilray stock has slumped despite some key catalysts

TLRY share price has dropped since October last year, mirroring the performance of other cannabis companies.

Indeed, the closely-watched AdvisorShares Pure US Cannabis ETF (MSOS) has dropped to $3.78 from last year's high of $7.25.

The ongoing Tilray Brands stock price crash is happening because the hype surrounding the US reclassification has waned, with President Donald Trump putting his focus on the ongoing Iran war.

Trump and the Justice Department have not mentioned the reclassification since last year, raising concerns on whether it will happen.

That reclassification would be a game-changer in the cannabis industry as it will move it into a less dangerous category.

In the case of Tilray, the reclassification will make it easy for it to expand to the United States, a country it has no presence in. 

Still, despite this, the most recent results showed that Tilray’s business is doing relatively well, with its key segments showing some revenue growth. It is also narrowing its losses 

The results showed that the company's business continued growing, with its net revenue rising by 3% to $217 million in the second quarter.

A closer look at its segments shows that the cannabis business did well, with the revenue rising by 3% to $67.5 million.

The revenue was due to the ongoing international growth in key markets like Germany.

Tilray’s distribution revenue, which includes Tilray Pharma, made $85.3 million, up from $67.5 million in the same period a year earlier.

Its gross profit also continued growing, moving from $8.4 million to $11 million.

The financial results also showed that the company's profit had narrowed.

It made a net loss of $43.5 million in the second quarter from $85.3 million. 

The only blemish in its financial results was its beverage business, which it has invested heavily in in the past few years.

Its revenue dropped to $50.1 million from $63.1 million a year earlier. 

The gross margin also narrowed from 40% to 31%.

Analysts tracking the company expects that its revenue growth will continue.

The average estimate is that its revenue will rise by 8.38% to $201 million.

Its annual revenue will rise by 5.2% to over $864 million in the current fiscal year, followed by $1.1 billion next year.

Tilray Brands stock price technical analysis

TLRY stock chart | Source: TradingView  

The daily chart shows that the TLRY stock has slumped in the past few months, moving from $15.73 in December last year to the current $6.73.

It has dropped below the important support level at $6.97, its lowest swing in December last year, February and March this year.

This support was the lower side of the descending triangle pattern.

The stock has dropped below the 50-day Exponential Moving Average (EMA) and the Supertrend indicator. 

Therefore, the stock will likely continue falling in the coming days, with the next key target being the support level at $5. This drop is about 25% from the current level.