Election Fallout: One Industry That’s Likely to Suffer
The outcome of elections can have far-reaching consequences, shaping policies and decisions for years to come. The recent election results in the United States are no exception. With the Republicans gaining control of the Senate and the House of Representatives, certain industries may benefit from the change in administration. However, one industry that could potentially take a hit is the cannabis market.
A Cloudy Future for Cannabis
The cannabis industry has faced significant challenges since Canada legalized recreational marijuana use in 2018. Companies in this space have struggled to perform, and Tilray Brands (NASDAQ: TLRY) is no exception. The company’s revenue and earnings have been inconsistent, and its top-line growth has largely been driven by acquisitions.
Diversification Efforts
To mitigate these challenges, Tilray has diversified its operations, entering the beverages market through a series of acquisitions. The company is now the fifth-largest craft brewer in the U.S. and hopes to eventually combine its cannabis and beverages businesses if cannabis legalization happens at the federal level.
State-by-State Rejection
On election night, three states had the opportunity to legalize adult recreational marijuana use: Florida, North Dakota, and South Dakota. Unfortunately, all three states rejected the measure. While Nebraska voted in favor of legalizing pot for medical use, this offers little comfort to Tilray and its peers.
Republican Resistance
The election results highlight an important point: Republicans are less likely to support legalization. A Gallup poll found that only 55% of Republicans favor legalization, compared to 70% nationally and 87% among Democrats. President-elect Trump, a resident of Florida, has expressed support for legalization in his state, but has also stated that it should be a state issue, rather than a federal one.
International Prospects
While Tilray has made progress in international markets, such as Germany, the U.S. market remains the most lucrative. Unfortunately, the company’s plans in the country are now looking uncertain.
A Bleak Outlook
In light of these developments, Tilray’s prospects look worse than they did before the election. The company’s financial results are likely to remain unimpressive, and its stock market performance will likely follow suit. Investors would be wise to exercise caution and avoid Tilray stock for now.
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