Is Tilray Stock the Next GameStop ?

Ever since a bundle of Reddit users on a stock chat page got together and decided mutually to turn GameStop (NYSE:GME) into a kind of whipping boy for the hedge fund system, many investors have wondered which stock would be next to receive a similar treatment. There are some signs that suggest Reddit retail investors may have a new target, and it's starting to look like that target is Canadian pharmaceutical and marijuana producer Tilray (NASDAQ:TLRY).

Going For Whole New Highs, No Pun Intended

Tilray has been on an upward tear so far, with a year-to-date gain approaching seven-fold at 670%. In fact, reports note that Tilray has jumped 50% just in recent trading. There's a shockingly clear terminator between the company's old price and new, as on Tuesday of this week it sat at $42.35, but on Wednesday, it had jumped to $65.94 at one point. It's fluctuated since, but $40 is starting to look less like a ceiling and more like a floor now, based on the trading ranges for the last few days.

Interestingly, this time around, the Reddit retail investor cabal seems to be focused less on one stock, like Tilray, and more on one sector: cannabis stocks in general. Similar gains have been seen at Aphria (NASDAQ:APHA) and Aurora Cannabis (NYSE:ACB) to some extent. Aphria is up 10% in recent trading, reports note, extending its year-to-date gains to 280%, while Aurora is up 20% recently, adding to its year-to-date gains of over 120%.

Word out of Reddit suggests a lot of positive buzz around pot stocks, with one post noting that the combined forces of Tilray and Aphria got that investor to “over $500k today”, with “much upside” left to come. Another noted that “weed (is) about to make me a millionaire in 2021.”

The Analysts Are Puzzled

Word from the broader analysis pool, as based on our latest research, is likely puzzled by the recent massive gains, as Tilray has been rated a “hold” for the last six months, trending ever more bearish in the meantime. Six months ago, the company had two “sell” ratings, 11 “hold” and two “buy.” It lost one of those “buy” ratings three months ago, and then one of the “hold” rating a month ago to reach its current level of two “sell”, 10 “hold” and one “buy.”

The price target, which had been slipping for the last several months, also recently popped up to nearly what it was six months ago. Six months ago, it was at $12.85 per share. That slid to $11.04 three months ago, and $10.95 a month ago. Today, however, it's up to $12.27, and that represents substantial downside against yesterday's closing price of $63.91.

Word from Cantor Fitzgerald analyst Pablo Zuanic suggests that it's a Reddit / Robinhood rally in progress, noting that the rally is “not entirely based on fundamentals.” Those who have already spoken to Cantor Fitzgerald about shorting Tilray as a result, Zuanic noted, have already been told “you know what happened with GameStop on the way up.”

What's Really Happening With Tilray?

The question that most investors will want to answer is “What's really happening with Tilray?”. It's a good question, and of course, possible answers are thick on the ground. The idea that this is just the latest target for those who have weaponized hate against the broader system is valid, but there are some other contributing factors at work here.

One of the biggest possibilities is the result of the US elections. While still contested on several fronts—including a few unresolved court cases—right now the Democrats have control of the House, the Senate, and the White House. This makes for perhaps the best environment pot has seen in decades, though the Trump Administration didn't exactly seem unwilling to work with it. Still, the notion of national legalization has never been so pronounced as it is right now, and retail investors may be looking to play future hunches. The fact that Tilray has been setting up a merger with Aphria since last December, meanwhile, lends a little extra punch to such assessments; the Tilray / Aphria combination will be a big move for pot stocks, and retail investors may now be catching on to this development.

Throw in the fact that we've seen some gains previously from pot stocks based on the fundamentals, and the idea that retail investors are crowding into a space that's likely to do well on its own merits isn't out of line either. Still, a look at what Reddit et al did for GameStop is enough to make most investors marvel at the power of large numbers of investors  in one place. Pot stocks were already looking pretty good before Reddit swung its collective gaze upon them, and should still have plenty of room for improvement even from here.