Should You Buy This Stock After It Recorded a Surprise Profit?

The past five years have been a disaster for Tilray Brands (NASDAQ: TLRY). The cannabis company has seen its shares plunge because of terrible financial results and challenging industry conditions. However, due to a series of positive developments, Tilray's shares have soared over the past six months and are up by almost 25% year to date (as of Oct. 15). The company's latest quarterly update may have given investors another reason to consider the stock. Is now finally a good time to buy Tilray's shares?

A surprise on the bottom line

Tilray's stock has gained significant value in recent months, due to potential legal changes in the U.S. cannabis industry. Speculation has it that President Donald Trump is considering relaxing laws on the sector, notably by reclassifying the substance from Schedule 1 to Schedule 3. Schedule 1 substances are considered dangerous and have no medical uses, while those on Schedule 3 are acknowledged by the law to have some. This move could also make it easier for pot growers to raise funds, which has been a challenge in the country. As a leading player in the industry, Tilray is riding the wave of the news surrounding cannabis reclassification.

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Then there is the company's earnings report for the first quarter of its fiscal year 2026, ended Aug. 31. Tilray's revenue increased by 5% year over year to $209.5 million. The surprise was on the bottom line, though. Tilray recorded net income of $1.5 million. On the one hand, that's not that impressive for a company with a market cap of nearly $2 billion. However, for a corporation accustomed to net losses, it is a nice reprieve. To no one's surprise, Tilray's shares jumped on the news.

Is Tilray stock a buy now?

It did not take long for the market to erase some of the gains Tilray racked up thanks to its better-than-expected quarterly update. That's because in a Securities and Exchange Commission filing, the company announced plans to raise as much as $51.6 million by selling additional shares "from time to time."

In other words, the company plans on diluting existing shareholders, and it won't be the first time. This helps highlight the challenges Tilray faces that practically force the company to resort to these methods to raise funds. Of course, some might think these problems would be addressed if reclassification -- or even full-blown legalization -- efforts continue moving in the right direction.

Furthermore, Tilray is not just a cannabis play. The company has significantly diversified its business and now generates much of its revenue from its craft brewing segment. Not only does that decrease its exposure to the challenging and complicated marijuana industry, it also puts Tilray in a strong position to profit from legalization in the U.S. It would likely be able to use its existing beverage brands and distribution channels in the country to hit the ground running in the market for cannabis-infused drinks.

Despite all that, Tilray remains far too risky a stock. Never mind that there is no guarantee of reclassification or legalization (it's not the first time cannabis stocks have caught fire due to perceived progress along those lines). Even if Tilray gets its way and marijuana becomes legal at the federal level in the U.S., that won't guarantee its success, any more than Canada doing the same led to strong performances for the pot grower. We have about seven years of data showing that legalization in Canada did not produce strong financial results and stock market returns for the company -- or, for that matter, any of its peers in the industry.

Things might be different in the U.S., a much bigger market than Canada, but that will depend on too many factors that are beyond Tilray's control. Even if cannabis becomes legal in the U.S., there might remain stringent regulations regarding the consumption, sale, and distribution that could severely hinder the industry's potential. Many other things -- perhaps even unforeseeable factors -- might come into play. That's why Tilray remains a speculative play (at best) at this point. Even after its surprise profit, the stock isn't worth investing in.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.