- Tilray rebounded 4.7% on August 12.
- SNDL was up 15% last week.
- SNDL released second quarter results which showed a strong increase in revenue.
Canadian cannabis companies are looking to build on their recent success after a positive statement on the legalization of marijuana from its southern neighbor last week brought the industry back into the spotlight. Sen. Cory Booker (D-NJ) said in an Aug. 3 interview with Cheddar News that a compromise on the federal legalization bill may still be on the table before his term in Congress ends.
“The bill seeks to delist cannabis from the Controlled Substances Act and regulate it at the federal level while allowing states to decide whether to legalize cannabis or keep it prohibited. It also institutes a tax rate excise tax of 25% for large businesses and 12.5% for small and medium cannabis producers,” Booker said in reference to the Cannabis Administration and Opportunity Act (CAOA) which was introduced in July. that he mentioned was referring to the addition of certain measures to the SAFE Banking Bill that would allow cannabis businesses to use licensed banks.
The interview caught more eyes last week as the Senate was able to pass the Cut Inflation Act, a far-reaching bill that showed the upper house finally getting the ball rolling a year and a half later. President Joe Biden’s first term. So far, Senators Joe Manchin (D-WVa) and Kyrsten Sinema (D-AZ) have opposed passing major reform, but two recent bills touching on climate change and semiconductors have turned the tide and make it seem more likely that Democrats will pass even more legislation before the midterm elections in November.
Tilray (TLRY) the stock rose 4.7% to $4.02 on Friday, and SNDLformerly known as Sundial Growers, added 15% last week.
Tilray Stock News
Over the weekend, Tilray CEO Irwin Simon told Yahoo Finance broadcasters that legalization would likely happen suddenly because the legislation is widely popular with the public.
“If you look at cannabis today in the United States, 93% of Americans want medical cannabis legalized and about 63% to 65% want adult use,” Simon said. “Today it’s legal in about 33 states, plus DC, so […] a majority of people want cannabis legally.”
In its latest quarterly report, Tilray announced revenue growth of 8% year-over-year. Simon said Tilray’s alcohol, beer and cannabis-infused food company Manitoba Harvest would hold the line until U.S. legalization is finalized, but its line of cannabis-infused drinks would explode with full legalization. The business continues to operate at a loss, but that doesn’t stop Irwin from looking for new acquisitions.
“We’re not going to stop on the acquisition trail. We’re going to be looking at additional acquisitions to integrate with the Tilray brands,” Irwin said.
SNDL Stock Market News
SNDL released results on Friday that showed shareholders their first glimpse of the penny stock’s promise. SNDL reported revenue of just under C$224 million in the second quarter, a giant leap from C$7 million in revenue a year ago. The company’s series of acquisitions is the reason for the jump, particularly its alcohol business. The company’s net loss of C$74 million in the quarter largely reflects a C$35 million loss from investments. SNDL’s gross margin of C$43 million was the largest in its history. In the quarter a year ago, the company recorded a gross margin loss.
SNDL has been making a wave of changes lately. Along with changing its name to its ticker symbol, SNDL, the cannabis producer and liquor distributor also completed a 1-for-10 reverse stock split on July 26. It was a must to comply with Nasdaq listing rules that can drop a stock if it continuously trades below $1. SNDL stock closed at $3 on Friday.
It’s somewhat difficult to think of SNDL as a cannabis company at this point. In the second quarter, alcohol distribution and retail generated 66% of revenue and 77% of gross margin. Like Tilray, SNDL believes that US legalization will bring the cannabis segment to the fore.
Tilray’s Stock Forecast
Tilray shares have been trading in a price channel that has been widening since late June. A lower ascending trendline rises at an extremely gradual angle, while the upper trendline is more ambitious. This tends to give the chart a slightly more bullish posture. To break out of the channel, TLRY needs to break above $4.60 or below $3.30 at this time.
A support base has formed at $3.85, and below that lies medium-term support at $3.72. These nearby footholds make it easy to swallow a long starting at $4. Above the upper trendline is resistance at $5.17 from a mid-May range high. The Relative Strength Index (RSI) has been trending higher since the mid-June low, but it’s far from overbought at the moment. The risk-reward ratio is definitely on the upside this week.
TLRY daily chart
SNDL Inventory Forecast
Unlike its Canadian counterpart, SNDL remains in a downtrend. The current descending price channel started in May, but SNDL is in a long-term downtrend due to near-constant dilution over the past two years. The good news is that this dilution may be coming to an end as management purchased half a million shares on the open market during the second quarter. Once SNDL turns a profit, shareholders expect these buybacks to gain momentum, which will help the share price recover.
The possible good news is that a slight divergence between the stock price and the Relative Strength Index (RSI) occurred between mid-June and late July. The daily chart below shows the bottom of these periods on the rising RSI, while the price action was very bearish. Sometimes it portends a reversal in price action. To confirm this reversal, SNDL will need to overcome the upper descending trend line moving to $3.20. This is only a 7% advance.
With the price action already against the top of the channel, however, there is a good chance that SNDL shares will sell off after encountering resistance. Support is at $2.45 and $2.20.
SNDL Daily Chart