Tilray is posting growing revenues but the stock is falling. Is it a risky buy?

If earnings growth is a catalyst for stock performance, then Tilray Brands Inc. (NASDAQ:TLRY) should be among the best performers. In the second quarter of 2022, the company swung into a net income of $6 million from a net loss of $89 million in the previous year.

The company also announced that it would reach its $80 million synergy target by the end of May 2022. Following the quarter results, the stock rose 13%.

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However, since then, it has been falling. At the current price of $5.23, Tilray stock is massively discounted compared to its all-time high closing price of $214.06 on September 19, 2018. What went wrong?

Our thesis postulates that Tilray’s woes are not connected to significant market twists by the company. Investors could only be cautious about marijuana stocks, even as regulation of the product remains a gray area at the federal level.

Whereas Tilray tried to exert a position in the US by acquiring MedMen in August last year, the target is only a docile player. The target did little to excite investors of Tilray. As marijuana use and legalization remain in a gray area, TLRY could remain bleak for a while.

TLRY eyes $4.56 as weak sentiment prevails

Technically, TLRY is settling at minor support at $5.22. It is still under bearish pressure, with the bottom prices on the support zone at $4.6.

However, with the stock lacking a catalyst for a rise despite the robust quarter earnings, the stock could bottom at $4.56. An RSI reading of 32 indicates the stock is entering the oversold region. However, the stock has room to fall.

Concluding thoughts

Despite Tilray’s robust earnings, a gloomy outlook on the sector weighs on the stock. The stock could fall to the bottom before finding any catalyst for growth. For now, investors should stay away.

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