What Happened?
Shares of cannabis company Tilray Brands (NASDAQ: TLRY) jumped 18.9% in the morning session after it announced a strategic partnership to expand its medical cannabis presence in Italy, amid broader sector optimism fueled by potential U.S. regulatory changes. The company's subsidiary, FL Group, has partnered with Italian pharmaceutical firm Molteni to increase the availability of Tilray's medical cannabis extracts across Italy. Beyond this company-specific news, Tilray's stock is also benefiting from a powerful sector-wide rally. Investor optimism is surging due to speculation that the U.S. government may reclassify marijuana from a Schedule I to a Schedule III substance. This potential regulatory shift, reportedly being considered by the President, could provide significant tax relief for cannabis companies by easing restrictions under Internal Revenue Code Section 280E, which would directly improve profitability.
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What Is The Market Telling Us
Tilray’s shares are extremely volatile and have had 60 moves greater than 5% over the last year. But moves this big are rare even for Tilray and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 12% as the release of a favorable Consumer Price Index (CPI) report showed inflation cooling more than anticipated. The July report from the Bureau of Labor Statistics indicated a year-over-year inflation rate of 2.7%, just below the 2.8% economists had forecast. This suggests that price pressures on consumers may be easing. Particularly beneficial for the sector was the news that the food index remained flat, with grocery prices even declining by 0.1% month-over-month. This development is seen as a positive for the profitability of food, beverage, and personal care companies, as lower input costs and increased consumer purchasing power could boost sales. A Federal Reserve official's comments on the same day, noting that consumer spending fundamentals remain solid, further bolstered investor confidence in the sector's resilience.
Tilray is down 20.9% since the beginning of the year, and at $1.16 per share, it is trading 40.5% below its 52-week high of $1.95 from August 2024.
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