Investing in stocks with heavily discounted valuations can potentially yield impressive returns, but it’s crucial to tread carefully. Not every stock that’s taken a nosedive is destined for a bounce back. Often, investors might end up facing additional hassles and not the returns they hope for.
There’s always the hope that a struggling company might turn a corner, but when it comes to Tilray Brands, Moderna, and Plug Power, I wouldn’t bank on it. Let me share why it’s wise to steer clear of these companies, even if they seem like a bargain right now.
Tilray Brands
For a while, betting on Tilray stock has been synonymous with betting on U.S. marijuana legalization. Whenever there’s a hint of progress towards legalization or reform, Tilray often sees an uptick. Nonetheless, the long-term trajectory has been less promising. Nationwide legalization seems distant, and in five years, Tilray’s shares have plummeted over 94%. Although the company ventured into the alcohol market to diversify, its overall standing hasn’t notably improved.
Tilray has a pattern of burning through cash and consistently posting losses, making it a perilous gamble for investors. Despite its market cap sinking below $1 billion, don’t be shocked if its valuation keeps dwindling in the coming months and years.
Moderna
Moderna, a healthcare titan, had a golden opportunity recently but arguably squandered it. Riding high on the success of its COVID vaccine, which brought in billions of dollars, the company had the chance to diversify and reduce its dependency on COVID-specific products. Instead, it chose to focus intensively on COVID.
Their respiratory syncytial virus vaccine received approval last year, and they’re developing a flu vaccine. Yet, there’s nothing particularly revolutionary on the horizon to assure investors. Despite growing popularity, Moderna’s stock has slumped back to its pre-pandemic levels. Now, the company is in cost-cutting mode, forecasting revenue of just $1.5 billion to $2.5 billion this year, about $1 billion less than prior expectations.
It’s tough to identify any major catalyst that could rejuvenate Moderna’s business, making it a stock I’d suggest bypassing, even if it falls further.
Plug Power
Plug Power represents another precarious option investors should reconsider. During the meme-stock surge of 2021, when high-risk investments were chased at lofty valuations, Plug Power’s stock soared beyond $70. Currently, its shares are available for under $2.
The enthusiasm surrounding Plug Power’s hydrogen fuel cell systems as potential green energy solutions is high, but that’s a long-term game. The company’s finances are in shambles, putting its survival in question. As of September 30, 2024, Plug Power held only $94 million in cash and equivalents. It suffered operating losses exceeding $720 million and burnt through $597 million in just the first nine months of 2024, indicating unsustainable operations.
Given this uncertainty, investors are better served by considering other growth stocks rather than taking a risk with Plug Power.
