2 Beaten-Down Stocks That Still Aren't Worth Buying

President Trump's trade policies are sending many stocks that were performing well in the wrong direction and exacerbating things for others that were already struggling. So, the time seems ripe for investors to look for bargains.

However, not every beaten-down stock is worth investing in -- many look more like value traps than anything else, no matter how low their share prices have fallen. Consider two examples: Tilray (NASDAQ: TLRY) and Novavax (NASDAQ: NVAX). Both companies are trading well below $10 due to issues that predate the current uncertain economic environment, and neither seems particularly attractive for long-term investors, even at current levels. Here's the rundown.

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1. Tilray

Tilray's shares have dropped significantly this year and are worth about 58 cents apiece as of this writing. The company's struggles predate whatever is happening in the current market. Tilray, a leader in the cannabis industry, has reported poor financial results with inconsistent organic revenue growth (much of its sales growth has been from acquisitions) and persistent net losses over the past five years.

TLRY Operating Revenue (Quarterly YoY Growth) data by YCharts

It's not entirely the company's fault -- pot growers encountered significant regulatory troubles even in Canada, where recreational uses of the substance became legal for adults in 2018. However, the fact that Tilray's poor performance has largely been due to factors beyond its control is a strong argument against buying the stock today, even at current levels.

Some hope that there will be more regulatory wins for cannabis companies in the U.S. Tilray's CEO, Irwin Simon, even predicted that the substance would become legal at the federal level in the U.S. in the next four years.

Never mind that there is no guarantee of this outcome. Even if it does happen, Tilray would still encounter significant headwinds: The market would become saturated and highly competitive, and illegal channels would likely remain, taking some market share away from legal providers. That's what happened in Canada. Could Tilray's increasingly diversified operations help the company bounce back? It became a leading craft brewer thanks to a series of acquisitions.

It was a great move for Tilray to decrease its exposure to its core cannabis operations, but it's still far too early to bank on the company's craft-brewing business to lead to a complete rebound. That's why Tilray is still not worth investing in today, even for less than $1 per share.

2. Novavax

Things aren't going particularly well for Novavax, a vaccine maker that made some noise in the COVID-19 space. Last year, the U.S. Food and Drug Administration (FDA) placed its phase 3 studies for its two leading candidates, a combination COVID/flu vaccine and a stand-alone flu vaccine, on clinical hold due to suspected adverse reactions. Though the agency eventually lifted those holds, Novavax has never erased all the market losses it experienced as a result.

To make matters worse, the FDA recently missed the deadline to approve Novavax's coronavirus vaccine, which is still under emergency use authorization (EUA). The health regulatory body asked for more information before moving forward.

These developments highlight the fact that smaller biotech companies face significant risks. Though some might still be worth investing in, Novavax's track record over the past five years does not inspire confidence. The company faced several delays in submitting an application for EUA for its coronavirus vaccine, leading to a delayed launch and less revenue than it otherwise would have generated.

Novavax has changed its CEO and board of directors since. The new team earned a win for the company last year; Novavax signed a deal with Sanofi that improved its prospects. Per the terms of the agreement, Sanofi will have the right to market Novavax's coronavirus vaccine in most countries. The former will also use the latter's adjuvant technology in some of its products in development. Novavax got $500 million in cash up front and will be eligible for milestone payments and royalties.

However, Novavax continues to trail other leaders in the COVID-19 vaccine market, while its two leading drug candidates will also face stiff competition. The regulatory roadblocks all of these products recently encountered make the stock even less attractive. That's why Novavax's shares are best left alone for now.

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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.