Jefferies Raises Tilray's Price Target to $2 on US Cannabis Rescheduling

Jefferies has raised Tilray's (TLRY) price target to $2 from $1.50, citing potential benefits from cannabis rescheduling from Schedule I to Schedule III in the US. The firm believes this could lead to easier research opportunities, lower taxation, and secondary benefits for cannabis companies. While acknowledging challenges in Tilray's alcohol division, Jefferies maintains a Buy rating and considers Tilray the "biggest potential beneficiary" of regulatory developments.

Tilray (TLRY) shares surged Monday after Jefferies analyst Kaumil Gajrawala maintained a "Buy" rating and raised the price target to $2.00 from $1.50. The analyst cited potential benefits from the rescheduling of cannabis from Schedule I to Schedule III in the U.S. as the primary driver behind the positive outlook.

The rescheduling, if implemented, would remove key federal restrictions that currently hinder Tilray's profitability and growth. It would allow the cannabis firm to claim standard business tax deductions under IRS Code 280E, dramatically improving its bottom line. Additionally, the reclassification would legitimize medical cannabis at the federal level, expanding access and accelerating demand, which could translate to continued momentum in Tilray shares.

Jefferies believes that Tilray is the "biggest potential beneficiary" of the rescheduling, given its strong liquidity and moderate debt levels. The investment firm also noted that the move could open the door for institutional investors and major banks to engage with Tilray shares, further boosting its financial and strategic outlook.

However, Tilray's stock has faced mixed analyst ratings, with an average rating of "Hold" and an average target price of $1.94. Despite the positive momentum, the company's financials indicate a challenging operating environment, with a negative net margin of 265.69% and a negative return on equity of 6.83%.

Tilray Brands Inc. has also applied for an extension to meet Nasdaq’s minimum share price requirements, with the company exploring options such as a reverse stock split. The company's share price has been trading below the $1 minimum required by Nasdaq for continued listing.

In summary, Jefferies' bullish call on Tilray is driven by the potential benefits of cannabis rescheduling, which could lead to increased profitability and growth prospects for the company. However, investors should closely monitor the developments in the rescheduling process and Tilray's financial performance.

References:
[1] https://finance.yahoo.com/news/jefferies-just-raised-tilray-stock-180827914.html
[2] https://www.investing.com/news/analyst-ratings/tilray-stock-price-target-raised-to-200-from-150-at-jefferies-93CH-4208417
[3] https://www.ainvest.com/news/tilray-stock-rallies-growing-reports-marijuana-rescheduling-schedule-iii-2508/
[4] https://parameter.io/tilray-brands-tlry-stock-rises-133-on-cannabis-rescheduling-speculation/