Under the Trump Administration, Tilray Brands' CEO remains hopeful about the prospect of marijuana legalization.
For numerous marijuana-related stocks, their shares can frequently fluctuate rapidly based on the outlook for legalization in the U.S. This is due to the substantial growth potential in the industry, but the progress heavily relies on legalization initiatives in more states and overall federal approval.
A stock that often experiences significant growth with discussions about marijuana legalization or reform is Canada-based Tilray Inc. (symbol: TLRY -4.89%). Over time, it has diversified into alcohol to reduce its reliance on just cannabis for growth. Its CEO, Irwin Simon, expresses confidence that under the incoming Republican administration, marijuana legalization is possible.
Why Tilray's CEO is optimistic about legalization during Trump's term
Upon Trump's victory in the U.S. election, pot stocks plummeted almost instantly. The AdvisorShares Pure US Cannabis ETF has lost around half of its value since Nov. 5, given the perceived negative impact of a Republican government on the industry, given its traditionally conservative stance on drugs.
However, Simon maintains a positive outlook. Recently, he declared on Fox that marijuana legalization could occur during Trump's tenure. He emphasizes the potential economic benefits and tax revenue the industry could generate. In New York state alone, cannabis sales have reached roughly $1 billion this year.
Nationally, the cannabis market could be worth up to $76 billion by 2030, according to estimates from Grand View Research, with an annual growth rate of 12%. However, the actual growth achieved within the next five years will significantly depend on the advancements made in legalization.
Is there reason to be hopeful for legalization in the near future?
It's not an unusual occurrence for cannabis CEOs to express optimism about marijuana legalization. Simon is no exception, and this likely won't be his last bullish statement. It's unlikely for him to predict a non-future for marijuana legalization under a different administration.
Instead, he focuses on the positive aspects. For Trump, Simon highlights the president's business acumen and his potential to assess marijuana from an economic standpoint, considering the potential job creation and tax revenue the industry could generate.
However, investors must acknowledge past experiences. Despite the enthusiasm surrounding marijuana legalization, there have been no significant changes in recent years to suggest it will happen soon. During Trump's campaign, he demonstrated an openness to easing marijuana restrictions, stating, "We don't need to ruin lives and waste taxpayer dollars arresting adults with personal amounts of it on them."
But he did not make any significant attempts in his first administration to legalize marijuana. Although his stance may have evolved since then, it remains unclear how much of a priority it would be for him, with the likelihood of a marijuana bill passing a Republican-controlled House and Senate uncertain.
Are marijuana stocks excessively risky to invest in?
Whether marijuana stocks are a sensible investment choice depends on the investor's tolerance for risk. If you expect significant progress and returns within a few months or years, the slow pace may not yield substantial returns, making cannabis an unattractive investment option.
Conversely, if you are prepared to wait at least five years, the current low valuations in the marijuana industry can be an excellent opportunity to invest in discounted stock options and remain patient for the long term. However, this strategy may not be suitable for risk-averse investors.
Tilray Inc. is one of the largest and most well-known marijuana stocks, consistently posting losses. Over the past 12 months, its net loss exceeded $212.6 million. Most investors would likely find safer growth stocks a better option. Yet, for those who have the time, patience, and capital to spare, there is a bullish case to be made for long-term marijuana stock investments.
The optimistic outlook from Tilray's CEO Irwin Simon towards marijuana legalization under President Trump's administration is based on the potential economic benefits and tax revenue the industry could generate. Despite past experiences and uncertainty about legislative changes, Simon emphasizes President Trump's business acumen and his potential to view marijuana from an economic standpoint.
Investors considering marijuana stocks should be aware of the sector's risk profile. While low valuations in the marijuana industry may present an opportunity for long-term investment, the slow pace of progress may not yield substantial returns in the short term, making it an unattractive option for risk-averse investors.
