Why Tilray Shares Got Smoked This Week

What happened

The stock of Canadian cannabis company Tilray Brands (TLRY -6.89%) has dropped more 50% since the company reported its fiscal third-quarter results in early April. A good portion of that decline occurred this week alone with shares down 17.5% midway through the final trading day, according to data provided by S&P Global Market Intelligence.

So what

From a macroeconomic perspective, investors are fleeing growth stocks like Tilray as inflation data continues to create fear and uncertainty. The company has told investors it has an ambitious goal of realizing $4 billion in annual revenue by the middle of 2024. With less than $500 million in sales for the nine months ended Feb. 28, 2022, that goal seems more than just ambitious. And with the general economic outlook growing more and more murky, investors are likely beginning to discount the possibility that it will be achieved.

Now what

CEO Irwin Simon has been clear that he wants to position his company for the potential federal legalization of marijuana in the U.S. But with that potential legislation not within a realistically visible timeline, Tilray has pivoted somewhat.

It acquired craft brewer SweetWater Brewing, Breckenridge Distillery, and hemp products company Manitoba Harvest to help establish infrastructure in the U.S., and it says those brands are profitable in their own right. But the company has also begun to focus on its medical marijuana business in Europe as well as adding cannabinoid-based medicine products in Canada. 

In its fiscal third-quarter earnings conference call for investors, Simon said the European Union alone could provide $1 billion toward its $4 billion revenue goal. And the company just announced a THC-derived CBN product in Canada as a sleep aid. CBN is a cannabinol that, unlike CBD, can produce mild psychoactive reactions. 

But this seems like a pivot to look for other pathways to achieve the revenue goal. And with inflation also in the mix, investors seem to be rethinking what the future will hold for Tilray.