What was once a hopeful question in the cannabis industry that buoyed North American cannabis stocks is now a pessimistic conundrum and the number 1 reason why marijuana stocks continue to struggle.
That question is, when will the United States legalize marijuana federally?
This is the biggest challenge facing the burgeoning legal cannabis industry. And according to Irwin Simon, CEO of Tilray, it’s a challenge that is preventing publicly traded companies in the sector from growing. It is this hurdle, he notes, that prevents institutional investors from buying cannabis stocks.
In a recent interview with CNBC, Irwin pointed out that shares of companies like Tilray (NASDAQ:) (TSX:) are only issued by retail investors. Once marijuana growers and retailers have access to investment from large institutions – when legislation such as the Secure and Fair Enforcement Banking Act being passed in the United States, often referred to as the SAFE Banking Act, is approved – Cannabis companies will find it easier to generate cash to develop their acquisition strategies and free themselves from heavy debt.
Earlier this month, the US Congress passed the Marijuana Opportunity Reinvestment and Expungement Act, also known as the MORE Act, for the second time. This law would reclassify cannabis under the Controlled Substances Act, essentially making it a legal drug, and trigger a slew of penal reforms to legalize the use of the drug. But there is no timeline as to when it would be approved by the Senate.
Earlier this month, Tilray also released its . The company posted revenue for the three-month period of $151.9 million, missing estimates of $156.2 million.
But there were some positives. Cannabis sales reached $55 million and distribution revenue, which comes primarily from its medical cannabis and pharmaceuticals businesses in Europe, reached $62.5 million, or 41% of sales, the Tilray’s largest retail segment.
Reports claim that Tilray is focusing more on its growing medical cannabis markets in Europe. In its earnings report, the company said international cannabis revenue was “up more than 4,000% from the prior year quarter.”
Tilray stock rallied briefly after the earnings report was released. But the gains quickly tapered off. Tilray stock closed last week on the NASDAQ at $5.24, well below its high of around $24 reached in January 2021, but above its 2020 low of around 4.80. $.
Consensus estimates from 18 analysts polled by Investing.com have a 12-month average price target of $8.64, representing a 64.9% increase from last week’s close.
Tilray stock was down 4.34% on the NASDAQ yesterday, closing at $5.05.