This Stock Has Almost Tripled in 6 Months. Here's What Investors Need to Watch Next

Who says cannabis stocks can't perform well? Although the sector's performance has been dismal in recent years, the second half of 2025 has seen a turnaround for industry leaders. Take Tilray Brands (NASDAQ: TLRY), a Canada-based pot grower. The company's shares have increased nearly 200% during the past six months, and this momentum could carry into 2026. Does that make Tilray's shares a buy? Here's what investors should watch out for.

The industry moves forward

During the past few years, shares of Tilray and those of its peers in the cannabis industry have surged multiple times on the expectations that there would finally be some positive regulatory developments in the U.S. However, these hopes never materialized, until now. President Donald Trump has signed an executive order to reclassify marijuana. Let's break down what exactly this means. Under U.S. law, controlled substances are put into one of five categories, deemed "schedules," by order of their usefulness for at least some medical purposes and the extent to which they are likely to be abused, and whether they are safe to consume.

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Schedule 1 drugs, where marijuana was classified until Trump's executive order, are considered the most dangerous, and there is, under the law, no accepted medical use for them. Schedule 3 drugs have a lower potential for abuse than those in the two categories before it, and also have some accepted medical uses. Trump taking marijuana out of Schedule 1 and putting it in Schedule 3 has important implications for the cannabis industry. Let's consider three of them.

First, it would make research into potential medical uses for cannabis easier. Second, it would make it a bit easier for pot growers to access some banking services, which are currently difficult to obtain. Third, it would have huge tax implications. Because of U.S. tax laws, companies that distribute Schedule 1 or Schedule 2 substances cannot deduct normal business expenses from their income.

But if cannabis is reclassified as planned, this will no longer apply to companies in the sector. That will mean higher operating profits and margins for cannabis companies (all else being equal).

Why does this matter for Tilray?

It's essential to note that these changes would have little to no impact on Tilray's business as it currently stands. The company does not make any revenue from the sale of marijuana products in the U.S. However, Tilray does offer hemp-based goods in the country. Hemp comes from the same plant but has lower THC (the compound that intoxicates users) than cannabis and is not considered a controlled substance.

It's not a leap for the company to launch a full-blown cannabis business from its current hemp operations in the U.S. Furthermore, Tilray is now the fifth-largest craft brewer in the country, a business with a vast distribution network that could help it expand in other fields, including cannabis. Tilray managed to grab the largest market share in the Canadian marijuana market. If it can replicate that success in the U.S., a significantly larger market, it could achieve similar success in terms of market position.

So, interested investors should closely monitor whether and how Tilray will enter the U.S. cannabis market once this change is implemented. The company might also decide to make one or two acquisitions, which is an important way it has been able to extend its reach in Canada.

Is Tilray stock a buy?

There are several problems for Tilray, even with these positive developments. First, even if marijuana is reclassified, it will remain illegal at the federal level. That means it will still be illegal to transport the substance across state lines, which causes many challenges. Second, there are plenty of well-established cannabis companies in the U.S. with which Tilray will have to compete for market share. And this change would attract even more of them, potentially leading to the same oversupply problem we saw when Canada legalized weed.

Meanwhile, Tilray's financial results have remained subpar at best during the past five years, and the company remains unprofitable in most quarters. That's why, even with this positive change, it's hard to make a strong case for Tilray. Investors should avoid the stock.

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.