Tilray Brands stock price is surging: time to buy or sell?

Tilray Brands stock price has triggered a short squeeze this month as it surged to a high of $0.6570, its highest point since April 1, and 90% from its lowest point this year. Its market capitalization has jumped to over $680 million.

Tilray Brands stock price jumped despite risks

The TLRY stock price surge has coincided with the ongoing recovery of other cannabis stocks. For example, the AdvisorShares Pure US Cannabis ETF (MSOS) has jumped to $3, up by 40% from its lowest point this year. 

It is still unclear why the stock has surged this month because the company’s business is facing substantial risks, with its revenue growth slowing and its profitability remaining elusive. 

Furthermore, the odds of clear cannabis regulations in its potential American market remain low now that Donald Trump is in the White House and Republicans control the House and the Senate. 

The most recent financials showed that Tilray Brands’ revenue dropped to $185.8 million in its third quarter from the $188.3 million it made in the same period a year earlier. 

The company blamed the weakness to a discontinued product that made $6 million, and its strategic initiatives and SKU rationalization. Still, Tilray’s revenue should have grown because they included a few new brands in its portfolio.

Tilray Brand’s cannabis business continued to slow, generating over $54.3 million in revenue from $63.4 million a year earlier. This slowdown happened even as it expanded its German operations.

The slowdown of this segment is a sign that cannabis demand is not as high as was widely expected. This sector is also seeing high competition in Canada from companies like SNDL, Canopy Growth, and Aurora Cannabis. 

The company attributed this slowdown to its decision to pause some low-margin businesses like vapes and pre-rolls. 

With the cannabis business slowing, Tilray Brands has pivoted to other industries like alcoholic beverages. Unfortunately, the segment, which should be its growth engine, has weakened, with its revenue coming in at $55.9 million, up slightly from $54.7 million in the previous quarter. 

The other two businesses, distribution and wellness, are also not growing as much. Distribution revenue rose by 8% to $61.5 million, while wellness made $14.1 million. 

The next key catalyst for the Tilray Brands stock price will be its earnings, which will come out on July 28. The average revenue by 7 analysts is that its fourth-quarter revenue will come in at $250 million, up by 8% from a year earlier. 

Tilray stock price forecast

The daily chart shows that the TLRY stock price bottomed at $0.3487 and then bounced back to the current $0.6570. It has moved above the 50-day and 25-day moving averages, which are about to form a bullish crossover pattern. This crossover is one of the most bullish ones in technical analysis.

Tilray Brands share price also moved above the descending channel that connects the highest and lowest swings between April 9 and July 1.

Therefore, the Tilray Brands stock price will likely continue rising as investors target the resistance at $1, and then resume the downtrend. If this happens, it will likely resume the downtrend and retest the support at $0.40.

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