Tilray Inc (NASDAQ: TLRY) chief executive Irwin Simon expects the recreational use of cannabis to be legalised on a federal level under Donald Trump as the President of the United States.
In other words, he expects legalisation to occur over the next four years.
Simon made that prediction in a recent interview with Fox Business.
But even if the President-elect moves in that direction, there’s reason to believe that Tilray stock may continue to struggle.
Let’s explore why.
Why has Tilray faced challenges in Germany?
The recreational use of cannabis has already been legalised in two major markets: Germany and Canada – but both of them still have strict regulations in place.
In Germany, for example, it remains illegal to set up a cannabis store.
So, if you want it, you’ll have to either grow it by yourself or join a licensed club that is prohibited from accepting more than 500 members.
And it’s not like there’s a ton of these clubs spread all over Germany. Plus, the clubs are quite choosy in picking their members as well.
So, yes, Germany has legalised the recreational use of cannabis – but the supply within the country remains rather restricted.
That’s why Tilray hasn’t been immensely successful in Germany, and why the disappointment may replicate even if the US legalises cannabis on federal level.
Why has TLRY faced challenges in Canada?
Competition has been a major hurdle for Tilray in Canada ever since the country legalised the recreational use of cannabis in 2018.
If the US follows suit, a number of other players may join the race, potentially leaving Tilray scrambling for market share.
Plus, strong local competitors with established relationships and supply chains could keep things challenging for TLRY.
Finally, the possibility that at least some of its potential customers will continue to tap on illegal channels to acquire cannabis to bypass regulations can’t entirely be ruled out either.
So, federal legalisation of cannabis in the United States would sure be a meaningful event for Tilray stock. But the challenges it has been facing all along could present in the US as well – limiting its upside potential in 2025.
Tilray stock is down more than 50% versus its year-to-date high at writing.
Is it worth investing in Tilray stock?
Tilray’s financials have been rather inconsistent in recent years.
And if federal legalisation is what it needs to change that, then TLRY remains a speculative investment at best since it’s only a prediction for now that Trump 2.0 will prove to be a tailwind for the cannabis market.
The incoming government itself has not indicated any such plans so far.
That’s part of the reason why Wall Street analysts currently have a consensus “hold” rating on Tilray stock that does not pay a dividend either at writing.
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