2 Stocks Near Their 52-Week Lows That Still Aren't Worth Buying

Fundamental investing wisdom tells us to buy stocks with potential when they are trading at a lower valuation. But when a company's prospects look dim, its stock isn't going to be attractive even when trading near its 52-week low. There is plenty of room for struggling companies to dip further, so it's best to stay away from them, no matter how cheap they look.

That's the situation both Tilray Brands (NASDAQ: TLRY) and Sarepta Therapeutics (NASDAQ: SRPT) find themselves in. Both stocks have significantly lagged broader equities this year and are hovering around 52-week lows. Despite the drop, they still aren't worth investing in. Here's what investors need to know about these two stocks.

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1. Tilray Brands

Tilray Brands, a leader in the cannabis industry, recently announced a proposal to execute a reverse stock split. Forward stock splits are usually a sign that a company is performing well. For reverse ones, they often signal a company has performed terribly and now has a share price below $1. That's the case with Tilray. It hopes this move will raise its stock price above $1 and help in its efforts to avoid delisting from the Nasdaq stock exchange.

But a reverse split will not change the company's dim prospects. Tilray faces a barrage of issues with little hope of turning things around. The Canadian cannabis market has been a disaster due to stringent regulations and stiff competition. Meanwhile, the legal status of pot remains challenging in many parts of the world. Germany made minor strides last year when it legalized marijuana for adults, but under very strict conditions that are unlikely to benefit Tilray.

Among other things, selling the substance remains forbidden. People have to join a cannabis club or grow it at home.

In the U.S., cannabis is still illegal at the federal level. Despite what Tilray's CEO, Irwin Simon, predicted, investors can't be sure that the situation will change in the next four years. Even if it does, Tilray might face the same headwinds it did in Canada. Legalization is no guarantee of success. True, Tilray has diversified its operations. Notably, it now has a significant footprint in the U.S. craft brewing market. This change hasn't improved Tilray's financial results, which remain unimpressive at best. That's been the company's norm for the past five years: Inconsistent revenue growth and persistent net losses.

Data by YCharts.

Things are unlikely to improve for the company anytime soon. So, even near its 52-week low of $0.41 per share, Tilray stock isn't worth investing in.

2. Sarepta Therapeutics

Sarepta Therapeutics is an innovative biotech company. It has developed several medicines for Duchenne muscular dystrophy (DMD), a progressive, genetic, muscle-wasting disease. One of the company's most important products is Elevidys, a gene therapy for DMD that addresses the underlying causes of the disease (unlike Sarepta's previous medicines, which only treat its symptoms). Elevidys has been helping Sarepta Therapeutics grow its top line at a good clip.

In the first quarter, the company's revenue increased by 80% year over year to about $745 million.

So far, so good. Here's the problem. Sarepta Therapeutics recently reported that a patient who took Elevidys died from liver failure. Though liver toxicity is a known potential side effect of the medicine, it's not clear that it was the direct cause of the patient's death, especially since he had suffered from a cytomegalovirus infection (which also causes liver problems) before his death.

Still, the market hates uncertainty. Sarepta Therapeutics' shares fell off a cliff on the news. And it got worse when the company released its latest update. Sarepta Therapeutics cut its guidance for the full fiscal year 2025, partly because of hesitation from patients following the recent tragedy. In fact, the company's performance in the first quarter wasn't as good as it would have been without this debacle.

In Q4, Elevidys' revenue declined by about 2% year over year. Sarepta Therapeutics might have to deal with this issue for some time, and as long as it does, investors should stay away. The stock is trading close to its 52-week low of $35.46, but it's still not attractive right 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.