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For every good stock you can buy, there are usually at least two bad stocks that are best avoided. It may be tempting to buy stocks that are declining in value because they look cheap, but there’s often a good reason for the decline. If the stock price has fallen more than 80% in the past five years, that’s probably a good sign that there’s something seriously wrong with the business. And unless you have a very compelling reason to invest in it and believe it will turn things around, you’re probably better off avoiding it.
It brought me a stock I never imagined buying, it’s a cannabis producer tilray brand (NASDAQ:TLRY). The stock price has fallen more than 95% in the past five years. And while many cannabis investors remain bullish on cannabis, this business is extremely risky. Here’s why if I had to make a list of things I should never buy, Tilray Brands stock would definitely be on it.
The company operates in a market with limited growth potential.
To be fair to Tilray, I would never buy it. canadian cannabis strains. The reason is simple: there are too many marijuana producers on the market, increasing supply and pushing down prices. This is why Tilray is entering the alcohol industry and focusing on the international cannabis market. The growth potential of the Canadian cannabis market is not at all attractive.
As a result, it becomes difficult to generate significant revenue growth. As an example, consider a company’s latest financial results. For the period ended November 30, Tilray reported $67.1 million in revenue from its cannabis operations. However, during the same period two years ago, cannabis revenue was $58.8 million. Over two years, Tilray’s cannabis revenue increased by only 14%, thanks to acquisitions.
Tilray’s management has often painted an exaggerated picture of the business.
What makes Tilray an even less attractive investment is its management. I’m wary of companies that significantly overstate their long-term expectations and potentially disappoint shareholders in the future. That’s how I felt in 2021 when the company’s CEO, Irwin Simon, “charted a path” to reach $4 billion in sales by 2024.
Today’s Tilray is nowhere near that level. Current annual occupancy is less than $800 million. And I’m not just speaking from hindsight here. I was skeptical about Tilray’s forecast when it was first announced, noting how incredibly optimistic management was relying on significant revenue from the US and European markets. I was there.
Adding insult to injury, the German government said in 2022 that a press release issued by Tilray claiming that it had held a “roundtable” with German officials about legalizing cannabis in the country was not accurate. was. This was a great example of how Tilray’s management team can stay ahead of the curve.
Even if you can stomach the risk, there are much better stocks to buy than Tilray Brands
Tilray Brands is not a great business to own. If you are bullish on marijuana and want to take a long-term opportunity in this industry, a better option is to simply invest in multi-state marijuana operators that are already operating in the US market. maybe.Investment in Tilray based on hope The idea that it could someday enter the U.S. is a much riskier strategy, and one that many cannabis investors buying stocks are likely counting on today.
There’s no compelling reason to believe Tilray will find a better path forward. Acquiring companies could generate more manufacturing revenue, but it doesn’t necessarily mean it’s a better investment for Tilray. And much of its recent growth has come from acquisitions. Tilray is not a great growth stock and the risks are too high to make it worth taking a chance on.
Should you invest $1,000 in Tilray Brands right now?
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David Jagielski has no position in any stocks mentioned. The Motley Fool recommends his Tilray brand. The Motley Fool has a disclosure policy.
1 Stock I wouldn’t Touch With a 10-Foot Pole was originally published by The Motley Fool
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