Why Tilray Stock Is Dropping Right Now: Will It Continue on a Downtrend?

Tilray Stock Forecast

Another day, another massive shift in Tilray Inc (NASDAQ:TLRY) stock. This time, however, we’re seeing red across the board: the stock price was down about 24% by early-afternoon trading. This has left many asking, “Is TLRY stock in a bubble?”

One thing is certain, the Tilray stock forecast has never been more volatile. The stock has gained and lost 20% in separate days this week. The stock has always been unpredictable, but now things have entered another level.

As noted above, the question on everyone’s mind is whether TLRY stock is in a bubble. As far as I’m concerned, the answer is “yes,” but with an asterisk.

The fact is, you don’t gain over 1,000% in value in a little over two months without some significant market correction being on your horizon. The stock’s growth has long ago outpaced sustainability and, as such, we should expect some manner of a significant pullback eventually.

I warned last week that this was on the way. While the beginning of this week made me look foolish when Tilray Inc gained about 40% in a single day, the end of the week has vindicated my prediction, with the stock price falling dramatically these past few days.

The Tilray stock correction was bound to hit, but the real question is, “How long will it last?” That is far less certain.

While I’m convinced that the hype surrounding Tilray is overblown and we are in bubble territory, the company chose the perfect time for its initial public offering (IPO). And that’s where the asterisk comes in.

Between the massive investment from “Big Alcohol” that has spurred growth industry-wide, and the coming Canadian marijuana legalization on October 17, there is so much goodwill surrounding pot stocks that I anticipate another big push in share prices in the lead-up to legalization in Canada.

So, the marijuana market correction is likely to fizzle out well before October 17, meaning that we’ll likely see gains return to pot stocks in a few weeks, with a far more likely outcome being just a few days of pullbacks before we see shares rise again.

And Tilray, beyond the hype, has made some serious progress in differentiating itself from its competitors, making a real case as to why it deserves its massive surge in value.

The first major success for TLRY stock came from supply agreements being signed with several provinces in Canada in anticipation of Canadian marijuana legalization.

The next huge win came when Tilray scored an agreement with the U.S. Drug Enforcement Administration (DEA) to supply marijuana for clinical research in California.

This is a strong step toward U.S. marijuana legalization. After all, if cannabis is considered to have some medical benefits, then it will be removed from Schedule I classification, which specifically designates substances that are illegal and have no medical benefit.

While these are victories for Tilray, they aren’t quite enough to justify 1,000% growth; few things are.

Analyst Take

There are certainly reasons to be high on the Tilray stock forecast, but ultimately, the stock price has jumped far too high and fast, putting it in bubble territory.

We’re going to see a number of pullbacks in TLRY stock, but I don’t think the stock is going to be doomed. Not to mention, there’s a good chance that this correction will be a short one, just a few days.

In my mind, Tilray is still the best short-term play in the legal cannabis industry, both for shorters and for day traders. The volatility makes it an exciting stock to trade day-to-day, but I’m not so hot on Tilray stock long-term.