Pot stocks staged a significant rebound in August, with Tilray Brands (TSX:TLRY), for example, seeing its share price double. The broader cannabis sector may be poised for a new wave of gains. However, compared to the sector’s multi-year plunge and deeply depressed valuations, last month’s rebound remains only a minor fluctuation. That said, the recovery may offer speculative deep-value opportunities for efficient producers and small-cap companies—especially if U.S. policy undergoes changes.
Although major cannabis producers posted double-digit percentage gains in August, the strong performance over a single month holds limited significance in the broader context. Viewed on a five-year chart, August’s uptick is barely noticeable. Since peaking years ago, the cannabis sector has undergone a severe decline, yet considerable value may exist for courageous dip-buyers willing to enter at current lows.
The current environment seems more suited to a “cigar-butt” investing strategy (or perhaps “cannabis joint-butt” strategy). While recent momentum justifies renewed attention to high-quality names, given the sector’s persistent challenges and the potential return of negative trends, investors are advised to risk only what they can afford to lose. Should positive news emerge from U.S. policy developments, cannabis stocks could extend gains into late this year and early next. Nevertheless, a dollar-cost averaging approach over the full year is recommended at this stage.
Tilray stood out with particularly strong performance—its stock nearly doubled in August and soared more than 189% over the past three months. Jefferies analysts raised their price target on the cannabis stock to C$2.00 (representing roughly 75% upside from current levels). At around C$1 per share, the stock may offer an intriguing deep-value opportunity for risk-tolerant investors.
A potential shift in demand may be underway as the Trump administration pushes for the reclassification of cannabis as a less dangerous drug. Younger consumers appear more inclined to consume cannabis rather than alcohol, bolstered by the rise of cannabis-infused beverages and innovative vaping products. These trends could support sustained growth in the cannabis industry. Overall, the current rally in pot stocks may still have room to run.
