Tilray Brands Shares Up 2.8%

US equity futures were mostly pointing higher on Tuesday as investors prepare for a shortened trading session ahead of Christmas.

Standard & Poor's 500 and the Nasdaq edged up 0.1% each in premarket activity while the Dow Jones Industrial Average was off 0.1%. Asian exchanges were mixed while European bourses were mostly trending higher midday on the continent.

US markets will close early on Tuesday and remain shuttered on Wednesday for the Christmas holiday, reopening on Thursday.

Shares of NeueHealth surged 61% pre-bell as the healthcare company agreed to be acquired and taken private by an affiliate of New Enterprise Associates in a deal worth roughly $1.3 billion. Rumble declined 3.5% after closing Monday's session up 81%. Tilray Brands spiked 11%.

Tuesday's thin economic calendar has the Richmond Fed Manufacturing Index for December at 10 am ET.

Before the opening bell, bitcoin inclined 1.4% to $94,242, West Texas Intermediate crude oil gained 0.9% to $69.89 a barrel, yields on 10-year Treasuries inched up 0.2 basis points to 4.6% and gold moved less than 0.1% higher to $2,629 an ounce.

The most-talked-about stocks in the Reddit subforum Wallstreetbets were mixed in the early hours before Tuesday's opening bell.

Advanced Micro Devices added 1.6% in early premarket activity, extending the 4.5% gain from market close on Monday.

Nvidia retreated 0.2% in early premarket hours, from a 3.7% increase at Friday's close.

Tilray Brands shares were up more than 11% premarket, extending the 13.5% gains from the previous session.

Tesla stock was advancing 0.9% before the markets open, adding to gains from the 2.3% rise at Monday's closing.

MicroStrategy stock retreated 0.3% in pre-bell hours, continuing its decline from an 8.8% fall at Monday's close.

Intuitive Machines stock was down 0.2% premarket, backtracking marginally from Monday's gain of 7.4% at close.

DTE Energy shares were up 0.5% premarket, extending the 0.1% gains from the previous session.

Archer Aviation stock advanced nearly 1% ahead of the opening bell, partially offsetting the 1.2% loss from the prior session.

Palantir's shares were down 0.3% in pre-bell activity, after closing Monday with an increase of 0.2%.

Tilray Inc chief executive Irwin Simon expects the recreational use of cannabis to be legalised on a federal level under Donald Trump as the President of the United States.

In other words, he expects legalisation to occur over the next four years.

Simon made that prediction in a recent interview with Fox Business.

But even if the President-elect moves in that direction, there’s reason to believe that Tilray stock may continue to struggle.

Let’s explore why.

Why has Tilray faced challenges in Germany?

The recreational use of cannabis has already been legalised in two major markets: Germany and Canada – but both of them still have strict regulations in place.

In Germany, for example, it remains illegal to set up a cannabis store.

So, if you want it, you’ll have to either grow it by yourself or join a licensed club that is prohibited from accepting more than 500 members.

And it’s not like there’s a ton of these clubs spread all over Germany. Plus, the clubs are quite choosy in picking their members as well.

So, yes, Germany has legalised the recreational use of cannabis – but the supply within the country remains rather restricted.

That’s why Tilray hasn’t been immensely successful in Germany, and why the disappointment may replicate even if the US legalises cannabis on federal level.

Why has TLRY faced challenges in Canada?

Competition has been a major hurdle for Tilray in Canada ever since the country legalised the recreational use of cannabis in 2018.

If the US follows suit, a number of other players may join the race, potentially leaving Tilray scrambling for market share.

Plus, strong local competitors with established relationships and supply chains could keep things challenging for TLRY.

Finally, the possibility that at least some of its potential customers will continue to tap on illegal channels to acquire cannabis to bypass regulations can’t entirely be ruled out either.

So, federal legalisation of cannabis in the United States would sure be a meaningful event for Tilray stock. But the challenges it has been facing all along could present in the US as well – limiting its upside potential in 2025.

Tilray stock is down more than 50% versus its year-to-date high at writing.

Is it worth investing in Tilray stock?

Tilray’s financials have been rather inconsistent in recent years.

And if federal legalisation is what it needs to change that, then TLRY remains a speculative investment at best since it’s only a prediction for now that Trump 2.0 will prove to be a tailwind for the cannabis market.

The incoming government itself has not indicated any such plans so far.

That’s part of the reason why Wall Street analysts currently have a consensus “hold” rating on Tilray stock that does not pay a dividend either at writing.