Tilray (NASDAQ:TLRY) shares staged a massive 65% run from December 12 through December 16 as investors piled into cannabis stocks on growing expectations that a long-anticipated federal catalyst was finally approaching. That optimism peaked after media reports said President Trump planned to sign an executive order reclassifying marijuana from Schedule I to Schedule III, a shift that could allow cannabis companies to deduct ordinary business expenses such as rent, payroll, and marketing, offering meaningful tax relief.
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The rally, however, proved short-lived. After the initial surge, TLRY and its peers reversed course, with the stock sliding 20% from last Tuesday’s highs. The pullback reflects a classic “buy the rumor, sell the news” reaction, as investors reassessed the timeline and practical impact of rescheduling, which stops well short of full legalization and offers no immediate relief on issues like banking access or interstate commerce.
Among those keeping their distance from the cannabis-fuelled surge is investor Symeon Mavroudis, who is urging caution when it comes to reading too much into the latest round of regulatory scuttlebutt.
“As I see it, rescheduling is not a ‘magic button’ but an important (though partial) step toward normalization,” explains the investor.
When it comes to Tilray, Mavroudis points out that both execution and cost discipline will remain paramount. On that score, the investor notes some positive developments, including Tilray’s $25 million in annual cost savings (which is still shy of its stated goal of $33 million). In addition, the investor is encouraged by Tilray’s return to profitability in the fiscal Q1 quarter.
But is that enough to rebuild trust in TLRY stock? After all, the shares have had a brutal five-year run, collapsing over 80%. While the recent 10-for-1 reverse stock split earlier this month may improve trading dynamics, it doesn’t fundamentally alter the investment case – at least not in Mavroudis’ view.
“This stock can’t be considered a ‘heavy’ investment but as a speculative game that can give results,” Mavroudis adds.
Going forward, Mavroudis will be watching for better margin consistency and sustainable cash generation. He urges investors not to be tempted by the short-term feeding frenzy that was sparked by the latest regulatory developments.
“For me, the stock remains a high-risk bet that only investors comfortable with elevated risk should consider,” underlines Mavroudis, who is assigning TLRY a Hold (i.e., Neutral) rating. (To watch Mavroudis’ track record, click here)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.