Is Tilray Stock Set to Take Over the Marijuana Industry?

TLRY Stock Impresses, But Is That Enough to Crown It King of the Pot Sector?

Recently, we’ve been seeing some major shifts among the top pot stocks. In fact, I’d go as far as saying that, in 2021, we’ve seen more upheaval in the marijuana industry than we have since Canada legalized pot in 2018.

The biggest story in marijuana stocks so far this year is Tilray Inc (NASDAQ:TLRY). But is Tilray stock the new industry-standard bearer, or just a passing fancy?

First, let’s talk about how TLRY stock became the talk of the weed industry.

While Tilray Inc made waves as the first pot stock to have an initial public offering (IPO) on a major U.S. exchange, that proved to be little more than hype. Tilray stock began a long and steady descent from its initial immense gains.

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But now, investors have a real reason to take a second look at the company. Tilray Inc’s recent merger with Aphria Inc was a huge boon, sending Tilray’s market cap and share price skyrocketing.

And that makes perfect sense.

After all, Tilray and Aphria had a combined estimated yearly revenue of $874.0 million before their merger. That puts the merged company in a very exclusive club of marijuana companies nearing $1.0 billion in revenue. (Source: “Canadian Pot Producers Aphria, Tilray Unveil Merger Plan to Create Global Leader,” CBC, December 16, 2020.)

What’s more, the companies pointed out that they’re set to save about $100.0 million in costs in key areas after the merger, another positive sign for the long-term health of TLRY stock.

Better yet, with the merger, Tilray Inc is poised to be one of the biggest marijuana companies in the world by market cap, if not the biggest.

Chart courtesy of StockCharts.com

While Canopy Growth Corp (NYSE:CGC) still leads the pack, at least in terms of market cap, that lead is growing smaller by the day.

With its merger, Tilray Inc has a market cap of about $8.4 billion. Meanwhile, Canopy Growth Corp has a market cap of about $9.3 billion. That puts both companies way, way ahead of the second runner-up, Cronos Group Inc (NASDAQ:CRON), which has a market cap of $3.2 billion.

So what we have is a two-horse race for the top market cap in the marijuana industry.

Of course, market cap isn’t the be-all and end-all, but it’s a good leading indicator of which marijuana stock is gaining the most attention from investors.

One of my investment philosophies in the pot market has been to forget the little fish that pop in and out, and instead go for the companies that show potential for long-term growth.

In this case, Tilray stock looks set to become the new industry leader. If Tilray Inc proves itself to be stable, as well as able to continue capturing a larger market share and grow its revenues, then I believe it will have the potential to dominate the marijuana space.

What’s more, there’s another good sign that TLRY stock is poised to grow exponentially in the coming years if the company stays the course: it’s ambitious.

One thing I always loved (“loved” in the past tense, being the operative word) about Canopy Growth was its willingness to swing for the fences. It wasn’t afraid to make big investments that focused on the future of the marijuana industry.

But many myopic pot companies were so interested in trying to make maximal profits today that they forgot about the future potential of the industry as legalization spreads across the globe.

Canopy Growth, when it was headed by Bruce Linton, had the mentality that the marijuana industry is far bigger than just Canada, and that investing in the future would likely pay off down the line, even if it sacrificed some profits in the present.

With Linton gone and Canopy Growth Corp’s current focus on present-day profits, that has turned me off somewhat. Canopy Growth stock is still a strong pot stock with a lot of potential, but I’m not as hot on it as I once was.

Tilray Inc, on the other hand, has shown that it’s willing and hungry to grow. Its merger with Aphria is perhaps the only major move by a top marijuana company in the past 18 months or so.

And while many investors may be apprehensive about this kind of boldness, I’m of the complete opposite mindset: now is the time to strike. The cannabis market remains ripe with countless opportunities for expansion.

By pouncing on these opportunities now, Tilray stock can generate massive gains down the line if the company plays its cards right.

In other words, if Tilray Inc continues to make bold moves and take advantage of the growth opportunities in a softened marijuana market, that could make TLRY stock one of the hottest marijuana stocks.

Analyst Take

We’ve just begun to scratch the surface of all that the legal marijuana market has to offer investors. It could be beyond foolish to close oneself off to potential long-term gains in service of present-day profits.

Unfortunately, that’s exactly what many of the largest pot companies are doing. To be fair, with COVID-19 complicating the economic situation, I somewhat understand the impulse for caution.

But it doesn’t take an expert meteorologist to see which way the winds are blowing: marijuana legalization is coming to the U.S. (and the world) in the next decade. And with it, we’re going to see immense opportunities for the pot companies brave enough to cultivate them.

With Tilray Inc’s merger, it looks like the company may have the exact kind of intrepid mindset needed to fully profit from the pot sector in the coming years. That could end up rewarding Tilray stock investors.