Cannabis stocks exploded higher on Friday after reports that President Donald Trump plans to ease federal restrictions on marijuana through an executive order.
The Amplify Seymour Cannabis ETF rallied more than 54% for its best day ever as investors bet on a fundamental shift in how the federal government treats pot.
Trump is expected to reclassify marijuana as a Schedule III drug, moving it from the same category as heroin into a lower tier alongside substances like Tylenol with codeine and steroids.
The change would allow cannabis companies to access banking services and claim standard tax deductions that have been blocked under current rules. Importantly, the executive order may authorize a Medicare pilot program covering cannabidiol products for seniors with chronic pain and sleep issues.
Industry experts expect the rescheduling to unlock institutional capital that has stayed away due to federal prohibition. Major exchanges like the NYSE and Nasdaq will also begin listing U.S. cannabis stocks.
Is Tilray stock a good buy?
Tilray (TSX:TLRY), a Canada-based cannabis producer, surged over 40% on Friday as investor optimism surged on Wall Street. Despite the recent uptick, the marijuana stock is down 99% from all-time highs and has burned significant investor wealth.
Tilray went public in 2018 and over the past seven years has wrestled with a range of sector-specific headwinds. Several cannabis producers, including Tilray, increased marijuana production significantly, resulting in oversupply, lower prices, and higher inventory levels. Moreover, Tilray went on an acquisition spree, purchasing other cannabis producers at a premium.
In fact, the company’s goodwill and other intangible assets have reduced from $3.8 billion in fiscal 2022 (ended in May) to $780 million in fiscal 2025.
After years of reporting a net loss, Tilray is expected to improve its free cash flow from $14.8 million in fiscal 2026 to $43 million in 2030. Even if Tilray stock is priced at 30 times forward FCF, which is high, it will be valued at $1.3 billion by market cap, below the current valuation of $1.6 billion.
Moreover, even if marijuana is reclassified in 2026, Tilray will have to compete with several incumbents south of the border who are armed with much stronger balance sheets. One such cannabis stock is Green Thumb Industries (CNSX:GTII).
Is this marijuana stock undervalued?
Valued at a market cap of $2.2 billion, Green Thumb Industries has a significant presence in Illinois. Green Thumb Industries delivered solid Q3 results despite persistent headwinds facing the cannabis sector.
In Q3, Green Thumb reported revenue of $291.4 million, an increase of 1.6% year over year. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) stood at $80.2 million, indicating a margin of 27.5%. It reported an operating cash flow of $74 million and ended Q3 with $226 million in cash.
Analysts tracking Green Thumb stock forecast revenue to increase from $1.2 billion in 2025 to $1.4 billion in 2029. In this period, free cash flow is projected to improve from $151 million to $240 million.
If the marijuana stock is priced at 20 times forward FCF, it could gain 100% over the next four years, making GTII a top investment right now.
