You should avoid at least two terrible stocks for every excellent one. Cheap stocks may appear like fantastic buys, but they're generally falling for a cause. The business may be in trouble if a stock is down more than 80% in the past five years. You should generally avoid it unless you have a strong reason to invest in it and feel it will change things.
That leads me to Tilray Brands (NASDAQ: TLRY), a cannabis company I've never considered owning. Last five years, the stock fell almost 95%. Many cannabis investors remain optimistic, but the business is dangerous. Tilray Brands shares would be on my never-buy list for these reasons.
Its market has little growth potential. To be fair to Tilray, I never buy Canadian cannabis stock. The market has too many marijuana manufacturers, increasing supply and lowering costs. Tilray is entering the alcohol industry and focusing on international cannabis markets because the Canadian cannabis market has little growth potential.
This makes revenue growth challenging. Take the company's latest results. Tilray earned $67.1 million from cannabis in the quarter ending Nov. 30. Just two years prior, their cannabis revenue was $58.8 million. Tilray's cannabis sales climbed 14% over two years, thanks to acquisitions
Tilray management often exaggerates the company's performance. Management makes Tilray an even worse investment. I avoid companies that significantly overestimate their long-term expectations because they may disappoint shareholders. That's how I felt in 2021 when CEO Irwin Simon "mapped out a path" to $4 billion in revenue by 2024.
Tilray is far below that today. Currently, it generates less than $800 million annually. And I'm not simply looking back. When Tilray's estimate first came out, I was apprehensive because management was so enthusiastic about U.S. and European revenue.
The cherry on top occurred in 2022 when the German authorities found Tilray's press release describing a "roundtable" discussion with politicians about legalizing cannabis inaccurate. It showed how Tilray's management can overreach.
You can buy better stocks than Tilray Brands if you can handle the risk. Owning Tilray Brands isn't smart. If you're in favor of marijuana and want to capitalize on its long-term potential, you may wish to invest in multistate marijuana companies already operating in the U.S. Many cannabis investors who buy Tilray stock now are betting on its U.S. entry, which is riskier.
There's no compelling reason to expect Tilray will improve. Tilray may not be a superior investment after acquiring companies, but it may increase revenue. Its recent rise is attributable to acquisitions. Tilray wasn't a good growth stock and was too risky to invest in.
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