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Once considered a darling of the cannabis sector, shares of Tilray Brands TLRY have steadily declined over the past few years due to regulatory hurdles and intensifying competition.
After becoming one of the first cannabis stocks to list on a U.S. exchange and briefly surpassing the $200 mark, Tilray has now fallen into the penny stock territory and faces the threat of a NASDAQ delisting.
Let’s delve into the company’s fundamentals to gain a better understanding of how to play the stock amid this price decline.
TLRY’s Cannabis Business Continues to Falter
Despite having a diversified business model, Tilray’s top line continues to be negatively impacted by the deteriorating core cannabis business. Though the company listed its stock on the NASDAQ in 2018 with the hope of marijuana legalization in the country, it remains illegal at the federal level to this day.
In its third-quarter results of fiscal 2025 (year ending May 2025), Tilray’s cannabis revenues declined 14% year over year to $54.3 million. Although the majority of revenues came from Canada, where the company occupies a significant market share, the small market size and saturation pose a challenge.
Per a Forbes article, Tilray commands 10% of the Canadian market, which is valued at $4 billion. On the contrary, the U.S. market is valued at $32 billion for legal marijuana but remains out of bounds due to federal laws. While Tilray also generates revenues from cannabis sales in non-Canadian markets, that segment just represents a small slice of the company’s overall revenues.
Compounding these issues, Tilray is also facing financial struggles. As a result, total revenues for the quarter declined 1% year over year, and the company even slashed its full-year sales guidance to $850-$900 million, down from the prior range of $0.95-$1.0 billion.
Due to the above factors, Tilray has entered the penny stock category and has triggered a delisting warning from NASDAQ. The company has proposed a reverse stock split, ranging from a ratio of 1-to-10 to 1-to-20, intended to boost the stock price above the $1 threshold, which will be voted on at a special shareholders' meeting on June 10.
From Pot to Pints: Tilray’s Bold Diversification Push
Faced with stalled growth in Canadian cannabis and no legal pathway to sell THC products in the United States, Tilray has shifted focus. Over the past few years, the company has acquired over a dozen beer and spirits brands, including deals with Anheuser-Busch and Molson Coors. Tilray is currently the fourth-largest craft brewer in the United States, with regional labels like Montauk Brewing, SweetWater, and Breckenridge Brewery under its umbrella.