Tilray Brands (TLRY 9.56%) can be a polarizing stock to own. While on the one hand, investors are optimistic about the potential for it to take off if and when the U.S. legalizes marijuana, on the other hand, its utterly disastrous financial results and poor stock returns turn many investors away.
Heading into 2026, there's some renewed optimism about marijuana reform taking place in the U.S., with President Donald Trump considering rescheduling the substance so that it's no longer deemed as dangerous and harmful as heroin and LSD.
Given these recent developments and taking into account Tilray's recent financial performance, I'll take a look at whether the cannabis stock is a buy, sell, or hold going into 2026.
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Will the U.S. government reclassify marijuana?
The Drug Enforcement Administration classifies controlled substances into different categories, depending on their potential risk and whether they have any useful medical benefits. Currently, marijuana is a Schedule I substance, meaning there is no accepted medical use and there is a high risk for potential abuse. That's the same category that heroin, LSD, and ecstasy are in.
It may be a bit perplexing for marijuana to be in that category when you consider that dozens of states in the U.S. have approved it for medical use, which would suggest that regulators do see some medical benefits from the substance. Trump has recently said he is considering reclassifying marijuana, but at the time of this article, no firm announcement has been made.
What would rescheduling marijuana in the U.S. mean for Tilray Brands?
The silver lining to all this news around marijuana rescheduling and whether it will or won't happen is that it doesn't really matter much for Tilray Brands. Tilray is based in Canada, and while rescheduling may mean more research can be done on marijuana in the U.S., and it can help multi-state operators reduce their tax bills, it's not legalization, which is what Tilray would need in order to effectively enter the U.S. market and sell its marijuana products at scale.
Rescheduling marijuana may be an acknowledgement of some medical benefits from using the substance, but by no means does that mean that marijuana legalization is around the corner. Republicans have historically taken a tough stance on drugs, and legalization would be incredibly difficult to pass. Even when the Democrats controlled the House and Senate a few years ago, there was no progress on legalization.
Investors should be careful about buying shares of Tilray Brands simply due to news related to marijuana rescheduling in the U.S. The company's overall fundamentals are much more important when deciding whether to buy or sell the cannabis stock.
Tilray's business has grown, but its bottom line remains troubling
In recent years, Tilray's business has grown, primarily through acquisitions and expansion into alcohol. The company has acquired brands that have enabled it to become one of the largest craft brewers in the U.S.
In its most recent fiscal year, which ended on May 31, the company's sales rose by 4% to $821.3 million. It's a modest increase, but it would have been a whole lot worse if not for its beverage business, which grew at a rate of 19%, totaling $240.6 million. Tilray's revenue from its cannabis segment declined by 9% to just over $249 million -- not a whole lot more than its beverage business.
Despite the overall growth, the company still incurred a net loss of $2.2 billion, largely the result of impairment charges of around $2.1 billion. The company also burned through $94.6 million in cash from its day-to-day operations, which is more than 3 times the $30.9 million it used up a year ago.
NASDAQ: TLRY
Key Data Points
Tilray's stock is a hard sell
I see Tilray's stock as a proxy for effectively betting on whether the U.S. appears to be moving forward on marijuana reform, as opposed to it being a good investment worth hanging on to for the long haul. With poor financial results and growth largely a result of acquisitions, Tilray's fundamentals are extremely troubling.
The stock may get a bump from positive cannabis news and developments, but investing in a stock based on what the government may or may not do is a risky proposition altogether. Not only can things change drastically from one administration to the next, but it can also take a long time for legislation to be put in place. This is a stock I'd avoid at all costs as it is highly volatile and risky.
