What happened

Shares of Tilray, Inc. (NASDAQ:TLRY) were up 11.8% as of 3:43 p.m. EDT on Friday. Tilray didn't report any new developments of its own. However, there were three potential factors behind the stock's nice gains.

First of all, investors are eagerly awaiting the opening of Canada's recreational marijuana market on Oct. 17. This anticipation could be driving major Canadian marijuana stocks higher to some extent. Second, the United Kingdom is on track to legalize medical cannabis effective Nov. 1, 2018 -- potentially good news for Tilray. 

We're also likely seeing a continued pattern of volatility with Tilray. The stock has experienced multiple double-digit percentage swings, both up and down, over the last several weeks on little or no significant news. 

Marijuana leaf displayed in fireworks show

Image source: Getty Images.

So what

What should investors take away from yet another nice gain for Tilray? In one sense, not much.

In the big scheme of things, another double-digit percentage gain is only a blip for Tilray. Any major swings for the stock have to be viewed with at least a bit of skepticism, considering Tilray's low stock float of only 10 million or so shares and its attraction for short-sellers. Those two factors make Tilray's share price more susceptible to fluctuations.

However, heightened investor interest in Tilray and other Canadian marijuana stocks is certainly warranted with only a few days remaining before the country's recreational marijuana market opens. Tilray has lined up supply agreements with most Canadian provinces, including the biggest prize -- Ontario. 

It's also definitely good news for Tilray that the U.K. will soon allow the legal use of medical marijuana. Tilray has already shipped a cannabidiol (CBD) product to the U.K., although it was only for one patient. The company should be in a good position to make inroads in the country's brand-new medical cannabis market. Arcview Market Research and BDS Analytics project that the U.K. will become the second-largest marijuana market in the world outside of North America by 2022.

Now what

Investors will soon find out how Tilray will fare in the Canadian recreational marijuana market. Don't be surprised if the Canadian market opening gets off to a rocky start, though. It could take a few months for the provinces to get their act together and for Tilray and its peers to work out kinks in their processes.

With Tilray's market cap now topping $13.5 billion, the expectations for the company both at home and in international markets are sky high. Even if Tilray enjoys tremendous success in Canada's recreational market and in other countries, it seems very unlikely that its growth will come anywhere close to justifying the stock's current valuation. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.