TLDR
- Tilray (TLRY) stock rallied over 133% in three months, driven by investor bets on potential U.S. cannabis rescheduling from Schedule I to Schedule III
- The regulatory change would eliminate Section 280E tax burden, allowing cannabis companies to deduct operating expenses and potentially reducing effective tax rates from 70%+ to normal levels
- CEO Irwin Simon purchased 165,000 shares at $0.61 per share in July, signaling executive confidence in the company’s strategy
- Tilray reported surprise adjusted profit of $0.02 per share but posted $2.18 billion GAAP net loss for fiscal year 2025
- Stock closed at $1.14 on Friday with analysts maintaining “Hold” rating and $1.92 average price target
Tilray Brands stock has become the market’s favorite way to bet on cannabis reform. The shares climbed over 133% in the past three months as investors pile into what they see as a transformative regulatory catalyst.
The Canadian cannabis company touched a 52-week low of 35 cents earlier this year. Now trading at $1.14, the stock has attracted massive volume as traders position for potential U.S. policy changes.
This isn’t just about Tilray’s latest earnings. The company did surprise analysts with an adjusted profit of 2 cents per share in Q4 2025. But that came against a staggering $2.18 billion GAAP net loss for the full fiscal year.
The real driver sits in Washington. Investors are betting the Drug Enforcement Administration will move cannabis from Schedule I to Schedule III classification.
Currently, cannabis sits alongside heroin as a Schedule I substance. This classification means “high potential for abuse” and “no accepted medical use.”
A move to Schedule III would change everything financially. The shift would eliminate Section 280E of the tax code, which prevents cannabis businesses from deducting normal operating expenses.
The Tax Problem That Changes Everything
Section 280E creates a nightmare for U.S. cannabis operators. They cannot deduct payroll, rent, utilities, or marketing costs from their taxable income.
This pushes effective tax rates above 70% in many cases. Companies struggle to turn profits or reinvest in growth.
Rescheduling would eliminate this burden overnight. Every U.S. cannabis operator would see instant financial relief.
While Tilray wouldn’t get direct tax benefits, the company has built a strategic U.S. platform. Through its beverage alcohol segment, Tilray became the 5th largest craft brewer in America with $240.6 million in annual revenue.
The wellness division adds another $60.5 million. This infrastructure positions Tilray to launch THC products once federal laws permit.
Tilray offers something most U.S. cannabis companies cannot – easy access for global investors. The stock trades on NASDAQ with high liquidity, often exceeding 40 million shares daily volume.
Many U.S. operators trade over-the-counter with limited accessibility. Tilray’s $1.17 billion market cap makes it simple for institutional money to move in and out.
Executive Confidence Shows in Share Purchases
Company insiders are backing up the optimism with their own money. CEO Irwin Simon purchased 165,000 shares at $0.61 per share in July.
The transaction increased his stake by 4.37% to 3.94 million shares. CFO Carl Merton has also been buying shares on the open market.
These purchases signal strong internal confidence in the company’s strategy. Executives are betting their personal capital on Tilray’s direction.
Wall Street maintains mixed views on the stock. Analysts hold a consensus “Hold” rating with an average price target of $1.92.
That target suggests 67% upside from current levels. However, Wall Street Zen recently downgraded Tilray to “strong sell.”
Tilray’s balance sheet shows improvement from debt reduction efforts. The company holds over $256 million in cash and has paid down approximately $100 million in debt.
This financial stability sets Tilray apart in a sector known for high leverage. The stronger balance sheet provides flexibility as regulatory changes unfold.
Short interest remains elevated at over 17% of the float. This creates potential for volatile moves if positive news emerges about rescheduling.
Recent trading showed the stock up 2.3% on Friday, though volume declined 39% from average daily levels. The company closed at $1.14 after trading as high as $1.18 during the session.
Institutional ownership stands at 9.35% with several large investors adjusting positions. Tidal Investments increased its stake by 15% in the second quarter to nearly 29 million shares.
The DEA’s final decision on rescheduling remains the key catalyst that will determine whether Tilray’s momentum continues into sustained shareholder returns.
