Here’s Why Tilray Stock Sank Monday

What happened

Tilray Brands (TLRY -4.92%) stock plunged as much as 10.5% Monday morning after the company released its fiscal 2023 second-quarter earnings report. The stock regained most of those losses after investors digested the report. But shares remain lower by 3.7% as of 11:35 a.m. ET.

So what

Investors weren’t happy when the Canadian cannabis company reported a quarterly loss and missed revenue estimates. While analysts expected Tilray to report a loss, the company’s $0.06 loss missed estimates by a penny and marked a drop from breakeven in the prior-year period on an adjusted basis. Net revenue of $144.1 million also came up short of expectations. But once currency adjustments were considered, investor perception started to shift, bringing shares back from the early double-digit decline. After those adjustments, reported revenue of almost $158 million exceeded estimates calling for about $156 million. 

Now what 

Tilray — and other stocks in the cannabis sector — have gotten crushed over the last year as progress toward legalization in the U.S. has come in fits and starts. Tilray has invested in alcohol and hemp businesses in the U.S. in part to position itself for potential marijuana legalization. But efforts by U.S. congressional Democrats to include provisions of the SAFE Banking Act in a larger defense bill failed in legislation passed last month. 

That was another blow for Canadian cannabis companies that want those banking laws changed to allow them to conduct business in the U.S. Tilray still holds the leading market share position in Canada for recreational marijuana as well as in Europe for medical marijuana sales. 

Tilray CEO Irwin Simon pointed out that its alcohol business was profitable in the quarterly period, with revenue growing 56% year over year. The company also holds $433.5 million in cash and marketable securities as of Nov. 30, 2022. Those facts helped give investors some patience for the legalization process in the U.S. But Tilray shareholders still have to wait for that one catalyst that is likely to meaningfully move the stock.