Tilray Brands Stock Is on Track for Its Best Year Since 2018. Has It Become a Good Buy?

Tilray Brands (NASDAQ: TLRY) is a leading cannabis producer in Canada, and it's been seven years since the country legalized marijuana for recreational use. Since then, however, Tilray's stock has been in a persistent tailspin. As competition intensified in the Canadian cannabis market and growth became more difficult, investors turned bearish on stocks like Tilray.

This year, however, things have been looking much better for the company. There are renewed expectations of marijuana reform in the U.S., and that has helped push Tilray's value up. Entering trading this week, the stock was up by 20% since the beginning of the year. And if that doesn't change, it will be Tilray's best performance since 2018, when it went public and its shares soared more than 200%.

Is this a sign that the tide has turned for Tilray, and that it can be a good investment to add to your portfolio today?

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Why Tilray Brands stock has done so poorly over the years

Although it's doing well this year, Tilray's stock is down a whopping 99% in seven years (as of Oct. 17). At its peak in 2018, its market cap reached a high of nearly $42 billion. That's a far cry from the less than $2 billion that Tilray is worth today.

The challenge for it and other cannabis producers is that while the Canadian market has become saturated, the U.S. market remains off-limits due to the federal ban on marijuana. Not only does that mean Canadian producers can't sell their products in the U.S., but with marijuana remaining a highly prohibited Schedule I substance, even companies in the U.S. can't transport cannabis across state lines. Thus, the growth prospects for many top companies in the cannabis industry haven't been all that great in recent years.

They have been so troublesome that Tilray has been expanding into alcohol as a way to boost its top line. In its most recent fiscal year, which ended on May 31, its net revenue totaled $821.3 million and rose by 4% year over year. But its cannabis business experienced a decline of 9%; it was largely due to acquisitions in its beverage segment that Tilray was able to achieve growth for the year.

What has changed this year?

Tilray is enjoying a much stronger year in 2025 but its financial performance hasn't suddenly become much better, nor have its growth prospects improved significantly, to warrant a great deal of bullishness. There are two factors I believe are responsible for its rally this year.

The biggest one is the hope that the U.S. government will reschedule cannabis from a Schedule I substance (the most dangerous drugs with no medical use) down to Schedule III (those with some medicals uses but also the potential for abuse). This would make it easier to research cannabis, and it would be a sign that attitudes are softening and that regulators are starting to acknowledge some of the medical benefits associated with cannabis. That excitement has investors optimistic that there may be greater reform -- potentially even legalization, on the horizon.

The second reason is that Tilray's valuation actually looks low with respect to its financial performance. The cannabis business doesn't look great, but the company has diversified its operations, which can add greater stability in the long term. And with the stock trading at a price-to-sales ratio of less than 1.8, Tilray is a fairly cheap-looking investment overall. Although it may not have bottomed out and there could still be further declines in its future, Tilray's beaten-down valuation may be a key reason that it has been able to rally this year, as it could be an appealing option for bargain hunters who are willing to take on some risk.

Tilray's stock isn't a safe buy just yet

Although the stock has been doing well this year, Tilray is by no means a safe buy just yet. It's unprofitable, its growth prospects are questionable, and the U.S. cannabis market is not opening up for the Canadian producer anytime soon.

There is also the risk that if nothing ends up happening with respect to marijuana reform in the near future in the U.S., the recent excitement around Tilray could evaporate, and the stock could be back to trading at less than $1 as it was earlier in the year.

Overall, this is a stock I'd stay far away from, as Tilray is still full of risk. There are much better growth stocks to buy in the market today.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.