2 Beaten-Down Stocks That Haven't Hit Rock Bottom Yet

Buying s of beaten-down companies only makes sense if there are good reasons to expect them to bounce back

If that's not the case, stocks that may look cheap and attractive aren't actually so

You should be careful to avoid catching falling knives

Image source: Getty Images

Canopy Growth Canopy Growth emerged as a leader in the cannabis industry toward the end of the past decade

The company has significant operations in Canada, the U. , and various countries worldwide, including Germany

Despite its position in these, Canopy Growth has been a foundly disappointing investment over the past five years

Its results vided another example as to why

The company's loss per for the period was CA$1. 05), worse than the CA$1. 75) it reported in the prior-year quarter

In fairness, Canopy Growth's troubles aren't entirely its fault

Hardly any pot company has found consistent success over the past five years, despite different focuses, strategies, and executions across the industry

That may suggest the blem is not exclusive to specific companies

No matter whose fault it is, though, Canopy Growth's is in shambles, and things are not to get better

True, the company is engaged in cost-cutting efforts while refocusing its portfolio in Canada on in-demand items, such as vapes and pre-rolls

Management predicts that it will achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in "the near-term. " Yet, even if Canopy Growth gets there, positive EBITDA would only be a step toward fitability

The company's efforts to reduce expenses may help boost margins in the short term

But it's challenging to envision a path for it to perform well in the long run, given the industry challenges that have led to inconsistent financial results over the past half-decade

Are investors to believe that, after all this time and countless failures across the industry -- both those of Canopy Growth and of others -- the company has finally cracked the code

Convincing the market that that's the case will require more than just positive adjusted EBITDA

I see little reason to expect the pot grower to perform well over the next five years

In fact, I'd expect the stock to sink even further -- and advise investors to stay far away

Novavax Examining Novavax's financial results and recent gress may suggest that the stock is a compelling investment opportunity

Furthermore, Novavax recently reported positive results from phase 3 studies for its stand-alone influenza vaccine and combination COVID-19/flu vaccine

That's to say nothing of the partnerships it's signed with companies Sanofi and Takeda Pharmaceuticals, which have paid Novavax for the rights to its COVID vaccines in various countries

But can the company sustain its performance over the long run

Bably not, and here's why

First, the coronavirus vaccine market has been inconsistent and hard to predict

Recent regulatory guidance in the U

May further complicate matters, with the Department of Health and Human Services no longer recommending the vaccine for certain populations, including pregnant women and healthy children

It's also worth noting that Novavax has generally played second fiddle to the leaders in this space, Moderna and Pfizer

Novavax's strong financial results in the first quarter are not at all indicative of how it will perform year in and year out

Second, the company's phase 3 wins for its two leading vaccines were not significant achievements

Although they induced strong immune responses in participants, Novavax itself states that these trials were not designed to demonstrate statistical significance

In other words, these results won't support apval

And while they're a good stepping stone to phase 3 studies that would, Novavax is waiting for a partner with big pockets to run these trials

That means it either doesn't have the funds to go at it alone, or management doesn't think doing so without a partner will be worth the investment -- or both

Even if it does find a partner, other companies (including Moderna) have made significant strides in competing vaccines

Lastly, the infusion of cash it received from its partnership with Sanofi will eventually run out

The company's will ly have little to show for itself after that point

All these factors make Novavax unattractive to long-term investors, as the stock could fall much further than it has in the past five years

Sper Junior Bakiny has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends Pfizer

The Motley Fool recommends Moderna

The Motley Fool has a disclosure policy.