Marijuana legalization doesn't appear to be on the horizon anytime soon. And as a result of the lack of excitement in the industry, many cannabis stocks are struggling, badly. Tilray Brands (TLRY -3.38%) is no exception as it looks to be on track for another tough year, with its stock price down more than 40% thus far in 2024, entering trading on Monday.
But with the stock taking such a beating not only this year but down more than 90% over the past five years, is it due for a rebound in 2025, given its improving financials?
Tilray has continued to find ways to grow outside of cannabis
Although there haven't been many enticing growth opportunities for Tilray to pursue in recent years in the cannabis industry, the Canadian-based company has been looking at other ways to expand its operations. A good example of that is in beverages, where Tilray has acquired several alcohol brands. By doing so, it has been able to expand into more locations in the U.S., potentially putting it in a better position for the day that marijuana ends up becoming legal in the country (although there's no guarantee that will happen anytime soon, or at all).
Net revenue recently hit the $200 million mark for Tilray in its most recent quarterly results, which covered the three-month period ending Aug. 31. And a big reason for the 13% increase in the top line compared to the prior-year period was its beverage sales more than doubling during that time, as acquisitions have helped bolster Tilray's revenue in that segment.
TLRY Revenue (Quarterly) data by YCharts
Unfortunately, due to its high overhead, the company hasn't been making enough progress with respect to costs; Tilray incurred a net loss of $34.7 million last quarter. While that was an improvement from a loss totaling $55.9 million a year ago, it highlights the company's struggles with staying out of the red.
Is there a catalyst out there that can help Tilray's stock rebound in 2025?
The last time Tilray's stock finished a year in positive territory was back in 2018, when its shares jumped by more than 215%. That was the year when Canada legalized marijuana for recreational use. And unless there's a similar type of catalyst on the horizon for Tilray and the cannabis industry as a whole, it may be another tough year for the stock in 2025.
While Tilray has been making good, incremental gains in recent years to grow its operations, a lot of the bullishness around the business ultimately ties back to hopes that the U.S. will legalize marijuana and the growth opportunities that would open up for Tilray. With a Republican government taking over next year, which typically has taken a hard stance on drugs, there's little reason to be optimistic that legalization will occur over the next four years. And that could mean another underwhelming year for the troubled pot stock.
Should you buy Tilray stock today?
A lack of profitability and underwhelming growth prospects in the cannabis industry are two big reasons investors should be extremely careful with Tilray Brands stock. The situation is concerning enough that I don't even think the company will be considered a cannabis company in five years; its operations may look much different due to its need to diversify and be less reliant on marijuana in the future.
Even if you have a high risk tolerance, you'll also need a lot of patience with Tilray Brands stock. While it may be one of the larger, better cannabis stocks to own, that still isn't much of a reason to invest in it right now. There are better growth stocks for investors to consider, which come with far less risk than Tilray. This is a good stock to put on a watch list, but it's not one I'd suggest putting any significant money into given the challenges it faces.
