Why Tilray Stock Soared More Than 350% This Month: Is TLRY Stock in a Bubble?

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Tilray Stock Forecast

Few words other than miraculous can be used to describe Tilray Inc (NASDAQ:TLRY) stock’s short time on the market. Since its initial public offering (IPO) in July, the stock has gained 1,000%.

The astronomical rise of Tilray stock in such a short period of time has many analysts asking how long this can continue—and, more importantly, if TLRY stock is in a bubble.

But before we tackle those questions, let’s first examine how Tilray stock earned these massive gains.

Why Tilray Stock Soared

The reason why Tilray stock soared this month and has since its inception is pretty simple: the U.S. is starved for marijuana stocks.

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While the legal cannabis industry is experiencing exponential growth in keeping with the beginning stages of what will be a global sector, the vast majority of those stocks are either available via Canadian exchanges or over-the-counter (OTC) listings.

Neither one is ideal for the U.S. investor who is either wary of OTC markets or simply unfamiliar with them—with the same going for the Canadian exchanges.

Both Cronos Group Inc (NASDAQ:CRON) and Canopy Growth Corp (NYSE:CGC) have garnered praise for their moves to U.S. listings and received a stock boost as a result.

But then came the Tilray IPO.

Being the first pure-play marijuana IPO on the Nasdaq, the company nearly doubled its IPO price in a few short days, and it hasn’t slowed since.

The thirst for marijuana stocks on major U.S. listings has revealed itself in a big way, with many investors looking to get in on the ground floor of TLRY stock— versus CGC stock and CRON stock, which were already established by the time they hit the U.S. listings.

Chart courtesy of StockCharts.com

The massive spike in the value of Tilray stock was jump-started then, and it has yet to slow down.

Tilray began following up its initial success with strong moves in the cannabis sector. It nabbed several big supply agreements with Canadian provinces ahead of marijuana legalization.

This helped keep the momentum going after the initial IPO craze dwindled.

But the company has once again stolen headlines, this time because of the U.S. Drug Enforcement Agency (DEA).

A new DEA agreement allows Tilray to export a cannabinoid study drug for clinical trial at the University of California San Diego Center for Medicinal Cannabis Research. (Source: “Tilray Receives Approval from U.S. Government to Import a Medical Cannabis Study Drug for a Clinical Trial at the University of California San Diego Center for Medicinal Cannabis Research,” Financial Post, September 18, 2018.)

Tilray is shipping the cannabinoid formulation south in capsule form for the trial, with both cannabidiol (CBD) and tetrahydrocannabinol (THC) being tested at the UC San Diego lab.

“Tilray is proud to support this crucial research,” said Dr. Catherine Jacobson, Director of Clinical Research at Tilray Inc.

“If this study can identify cannabinoids as a potential treatment for patients suffering from essential tremor, we can conduct further research and potentially provide alternative effective methods of relief for the high numbers of patients with ET.”

The drugs are being examined to treat essential tremor (ET), a neurological movement disorder. At this time, 0.4% of the population suffers from ET, while that number increases to 4.6%–6.3% among seniors.

This is good news both for people battling ET and for marijuana stock investors.

It’s no secret that marijuana companies view the U.S. as the Holy Grail of marijuana markets. After all, no country can compare in terms of wealth, population, and distribution.

But tricky federal law—namely, the federal prohibition on marijuana—makes it impossible to plan a national strategy for marijuana in the U.S.

The federal prohibition has led to problems in everything from distribution across state lines to receiving bank loans, to even being able to deposit money earned via marijuana at a bank.

All of this is what makes the DEA agreement such a big deal. It’s showing a more relaxed (if only slightly) stance from a federal agency, which many are reading as yet another incremental step toward U.S. marijuana legalization.

Tilray’s involvement, meanwhile, resulted in two massive stock price surges following the announcement, with gains of almost 40% the day after the agreement was made public.

Is TLRY Stock in a Bubble?

I, like many other analysts, are looking rather silly this week after having called for a TLRY stock correction.

While I still maintain that these gains cannot last forever, what is worth noting is that there is no better short-term marijuana pick than TLRY stock right now.

The gains have simply been too great and too sustained to be dismissed.

While there will eventually be a downturn, the hype surrounding TLRY stock only continues to build while Canadian marijuana legalization approaches. That event will likely spur industry-wide growth yet again, with Tilray stock due for another big run.

Analyst Take

There are few stocks as exciting or as potential-filled as Tilray.

While there are some concerns over its extremely rapid climb, the stock is ultimately due for another big round of gains before any major setbacks hit.

As such, it ranks among my favorite short-term marijuana plays. Therfore, my Tilray stock forecast for the next few weeks is bullish.