Canadian licensed producer Tilray’s (NASDAQ:TLRY) investors were thrown for a rollercoaster ride during Thursday’s (September 20) trading session as the company dropped almost 18 percent.
Shares of the cannabis company finished the day at US$176.35, representing a dip of 17.62 percent from the previous closing price. During after-hours trading the stock saw an additional drop of 2.18 percent.
Tilray stock has been on an unprecedented rush. Over the past month, shares of the company have grown 435.95 percent in value, with the stock reaching a 52-week high of US$300 price per share.
Tilray’s share price has outgrown estimations, according to research from analysts on TipRanks. The current price target for the company is US$34 on TipRanks based on three analyst reviews.
Experts have speculated that the limited float of shares has caused high demand for the stock. Critics have also released damning reports comparing the stock to the cryptocurrency craze of 2017.
Tilray’s detractors often point to the company’s low revenues, while its supporters highlight the potential Tilray holds compared to the rest of the cannabis market.
In its most recent quarterly update to shareholders, Tilray reported US$9.7 million in revenue during Q2 and US$17.6 million in first half of 2018.
Over the past two weeks, the Canadian company has made two announcements that highlight the debate about the rise of cannabis stocks.
Just a week ago, on September 13, the company secured the permits needed to export cannabis product to Germany. On Tuesday (September 18), Tilray obtained a unique deal with the US Food and Drug Administration to send a cannabinoid study drug to the University of California San Diego Center for Medicinal Cannabis Research.
“Tilray is providing a cannabinoid formulation for the trial in capsule form, which will allow researchers to test an investigational drug product containing two active ingredients extracted from the cannabis plant, cannabidiol (CBD) and tetrahydrocannabinol (THC),” the company stated in a press release.
Alan Brochstein, cannabis analyst with 420 Investor, said in an online interview that Tilray’s share price jump was built as a perfect storm for bulls in the space with the NASDAQ listing and limited float.
“I think this is a great thing in the long term, I think it’s going to end poorly most likely for anybody buying Tilray because they think is a good investment at this point,” Brochstein said.
The analyst admitted this stock in particular has “gone out of control,” and reminded investors that this event only shows the demand for pot stocks.
Sean Stiefel, founder of the Navy Capital Green Fund, told CNBC that cannabis stock valuations have “truly gotten ahead of themselves, and the retail investor here is buying air effectively.”
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.