Pot stocks have seen incredible strength over the past month, and Tilray (NASDAQ:TLRY) has been at the forefront of this cannabis rebound. TLRY stock has maybe seen a slight surge due to social momentum, but unlike other stocks caught up in meme stock trading, this company’s foundation is solid.
ETFMG Alternative Harvest ETF (NYSE:MJ) is up 5% the past month, while TLRY stock is up 40%. We think both dynamics will persist. MJ will continue to rise. TLRY will continue to dominate and lead the charge.
This is because the core dynamics underlying the global cannabis market are improving. Legalization is spreading, and restrictions are being relaxed.
One example of this is the MORE Act in the United States. Hopefully passing soon, this bill would decriminalize marijuana. This means marijuana will be removed from the list of scheduled substances, and it will no longer be a criminal offense to grow, distribute, or posses the substance. This is huge news for the US.
A little further north, Canada has also been working to ease cannabis regulations. Store-openings and product tracking regulations in particular have been relaxed, which allows for more convenient and cheaper process for consumers to legally acquire weed. Tired of shouldering black market risks, Canada is pivoting from black market to legal market.
Spending on illicit weed once accounted for all spending, before cannabis in any form was legal. But now, Canada finds itself for the first time with legal cannabis products accounting for more than spending on products in the black market.
Sales of legal cannabis will only continue to rise not only as money continues to shift into the legal adult-use cannabis market, but also as the legal market expands to include new consumers.
Two Heads Are Better Than One
Meanwhile, Tilray and Aphria are merging. And that’s a big deal.
Well, the cannabis industry needs to consolidate.
That’s just how hypergrowth markets work. In the early days, hundreds of companies pop up all over the place, all hoping to make it big. Then, the market matures and consolidates around only a few larger players. Smaller companies that don’t find themselves at the center of attention either get acquired or die off.
Tilray’s merger with Aphria is a natural part of this consolidation process. And it’s a smart move.
Combining Tilray and Aphria creates a larger, more established entity with less risk of being on the wrong side of the aforementioned market consolidation.
Plus, it’s a match made in heaven.
Tilray is a medical leader with a huge international presence. Speaking of which, they just launched a new medical cannabis brand that aims to provide “a broader spectrum of formats and cannabinoid rations at a better price point.”
This new brand expands Tilray’s offerings, which could enable them to reach an even greater audience of cannabis users, with different preferences and needs.
Aphria, on the other hand, is a…