Tilray Brands stock price has collapsed to its all-time low as concerns about its business continued. It has plunged by 70% this year and 76% in the last twelve months. This crash has brought its market capitalization to $405 million, down from over $24 billion during its peak.
Why Tilray Brands stock has crashed
There are four main reasons why the Tilray stock price has crashed this year. First, the drop is mostly because of the ongoing sell-off of other companies in the cannabis industry.
The AdvisorShares Pure US Cannabis (MSOS) ETF has plunged to $2.3, down from $55.65. Most companies like Canopy Growth, Curaleaf, Green Thumb Industries, Cresco Labs, and Aurora Cannabis have all plunged this year.
Second, the stock has plunged because of the ongoing regulatory situation in the United States. In most cases, cannabis stocks rise when there are signs that the US is about to pass cannabis laws and drop when the situation worsens.
Read more: Tilray stock price crashes below $1: buy the dip or sell the rip?
Odds of the US passing federal cannabis laws have dropped since the last election in which Republicans won the House of Representatives, Senate, and the presidency.
While some Republicans support the cannabis industry, many of them are highly opposed. Therefore, the earliest that the US can have these laws is after the Trump term ends, and if Democrats win the House, Senate, and presidency with a high margin.
While the US Supreme Court allowed cannabis to be legalized by states, the federal government has never passed laws approving it. As a result, companies still face major challenges, especially in the banking sector.
Read more: Tilray Brands stock price has crashed: time to buy the dip?
Losses continue rising
Third, Tilray Brands share price has crashed this because of its substantial losses which point to a cash raise later this year.
The most recent results showed that Tilray Brands made $185.78 million in the last quarter, a drop from the $188 million it sold in the same period last year. This decline happened even as the company increased its presence in the beverage industry.
Most notably, the company recorded a $793 million net loss, a big jump from the $104 million it made in the same period last year. This increase was mostly because of a $699 million impairment, which the management blamed to macroeconomic conditions and decline in market cap.
Therefore, this loss-making trend means that the company will likely raise additional cash this year since it ended the quarter with $199 million in cash and equivalents and $48 million in marketable securities.
Finally, there are signs that the company’s cannabis and beverage businesses are not thriving. The cannabis business made $54.3 million in revenue in Q1, down from $63.4 million last year. Its beverage alcohol business made $55.9 million, up slightly from $54.7 million.
Analysts anticipate that the company’s growth will continue slowing, with the average revenue estimate for the current quarter being $249 million.
Tilray Brands stock price analysis
The daily chart shows that the TLRY stock price has remained in a tight range in the past few months. It has formed a narrow channel shown in purple.
At the same time, there are signs that the stock has formed a bullish divergence this year. The MACD indicator moved upwards and is nearing the zero line. Also, the Relative Strength Index (RSI) has moved upwards and formed an ascending channel.
Therefore, the stock will likely have a bullish breakout, with the next point to watch being at $1, up by 145% from the current level.
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