Investors Are Cautious Amidst Struggling Stocks Like Tilray and Novavax

President Trump’s trade policies are causing a downturn for many previously successful stocks, impacting those already facing challenges even more. This situation creates an opportunity for investors to search for valuable bargains. However, not all distressed stocks are worthwhile investments—some appear to be value traps regardless of their low prices. Two examples are Tilray (NASDAQ: TLRY) and Novavax (NASDAQ: NVAX). Both companies are trading below $10 due to issues that preceded the current economic uncertainty, making them less appealing for long-term investors. Here’s a closer examination.

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1. Tilray: A Cautious Investment

Tilray’s stock price has plunged significantly this year, currently valued at around 58 cents. The company’s challenges began long before recent market fluctuations. As a key player in the cannabis sector, Tilray has reported disappointing financial results, demonstrating inconsistent organic revenue growth—a substantial portion of which stems from acquisitions—and ongoing net losses over the last five years.

TLRY Operating Revenue (Quarterly YoY Growth) data by YCharts

External factors have contributed to these difficulties; cannabis growers faced significant regulatory challenges, even in Canada, where recreational use became legal in 2018. Unfortunately, Tilray’s dismal performance being mostly attributable to these uncontrollable issues provides an argument against investing in the stock today, even at its current low price.

Some analysts speculate that cannabis companies in the U.S. may see regulatory breakthroughs. Tilray’s CEO, Irwin Simon, anticipates federal legalization within the next four years. However, this expectation lacks certainty. If such legalization occurs, the market could become oversaturated and intensely competitive, with illegal channels likely continuing to siphon market share from legal providers—similar to the situation in Canada.

While Tilray’s expanded operations into craft brewing through acquisitions might foster recovery, it remains premature to rely on this sector to lead a full turnaround. Therefore, Tilray does not appear to be a worthy investment at this time, even at under $1 per share.

2. Novavax: Facing Regulatory Hurdles

The outlook for Novavax, a vaccine manufacturer notable for its involvement in COVID-19 vaccine development, is not promising. Last year, the U.S. Food and Drug Administration (FDA) placed its phase 3 studies for two key candidates—a combination COVID and flu vaccine and a standalone flu vaccine—on clinical hold due to concerns over potential adverse reactions. Although the FDA later lifted these holds, Novavax has not fully recovered from the impact of these setbacks.

Compounding its troubles, the FDA recently failed to meet the deadline for approving Novavax’s coronavirus vaccine, which remains under emergency use authorization (EUA). The regulatory agency has requested additional information before proceeding.

Such developments exemplify the significant risks that smaller biotech firms face. While some may still merit investment, Novavax’s performance over the last five years casts doubt on its stability. Delays in submitting the EUA application for its coronavirus vaccine led to a postponed launch, resulting in lower-than-expected revenue.

Novavax has undergone management changes and hired a new board of directors since these challenges, and last year it secured a deal with Sanofi. This partnership enhances its potential by allowing Sanofi to market Novavax’s coronavirus vaccine in various countries while leveraging Sanofi’s adjuvant technology in some development projects. Novavax received $500 million upfront and anticipates milestone payments and royalties.

Nevertheless, Novavax continues to lag behind major competitors in the COVID-19 vaccine arena, and its lead candidates will likely encounter fierce market competition, exacerbated by recent regulatory obstacles. Consequently, Novavax’s stock is best avoided at this time.

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*Stock Advisor returns as of April 5, 2025

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.