1 Stock To Avoid After Election Results

The outcome of an election can shape policies and decisions for years to come, and the United States is no exception. With the election of Donald Trump as the 47th President of the United States and Republicans gaining control of the Senate and House of Representatives, some companies and industries could potentially benefit from changes in the administration at the national level. Others, not so much. One industry that could potentially lose out is the cannabis market. And as one of the leaders in this field, Brands Tilray‘ (NASDAQ:TLRY) prospects may suffer.

Tilray is betting on legalization

The cannabis industry has faced significant challenges since Canada legalized recreational use in 2018, from fierce competition to strict regulations for the sector. Companies in this space have generally performed abysmally. Tilray is no different. The company’s revenue and earnings — or lack thereof — have been inconsistent at best.

TLRY revenue data (quarterly) from YCharts.

And while Tilray’s revenue grew at a good pace in some quarters, much of that was due to acquisitions. That’s why the company decided to diversify its cannabis operations in Canada, specifically by entering the beverage market. Thanks to a series of acquisitions, Tilray is now the fifth largest craft brewer in the United States.

The company hopes to eventually combine these two markets if cannabis legalization occurs at the federal level in the United States. In fact, Tilray CEO Irwin Simon said, “Someday after legalization (in the US), we will infuse these drinks with THC. with CBD, but we will have distribution and brands when and if legalization happens.” There could be a lot of money to be made here, but not any time soon.

States reject legalization measures

On election night, three states had the option to legalize adult recreational marijuana use: Florida, North Dakota and South Dakota. All three states rejected the measure. Regardless, voters in Nebraska voted to legalize marijuana for medical use, but that’s little consolation for Tilray and her peers. The refusal of individual states to legalize recreational marijuana will not make a difference even if the substance wins at the federal level.

But now it seems that this is unlikely to happen in the near future. Florida, North Dakota and South Dakota voted red during the election. This highlights an important point: Republicans are less likely to support legalization. A Gallup poll last year found 55% of Republicans supported. The national average is 70%. Among Democrats, it’s 87%.

To be fair, President-elect Trump, a Florida resident, has said he will support legalization in his state. However, he also opined that this should be a state issue, meaning he would not necessarily support federal legislation on the matter.

Tilray Brands isn’t worth the effort.

Tilray’s prospects don’t depend solely on the US market. For example, the company has made progress in Germany. However, the US space is the most profitable, and the plans for cannabis producers in the country are not looking so good right now. What then remains of Tilray? Most likely, things are worse than they were before the election, and were already bad. Don’t expect Tilray to recover from the difficulties it has faced in recent years.

The company’s financial results are likely to remain unimpressive. The dynamics of the stock market should follow the same path. In short, Tilray stock is not an attractive choice right now. Investors should keep a safe distance.

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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.