Key Points
Teladoc Health and Tilray Brands have lost significant value over the past five years.
Teladoc is posting slow growth and consistent net losses, with little hope of a turnaround.
Tilray faces several roadblocks in the highly regulated cannabis industry.
10 stocks we like better than Teladoc Health ›
While basic investing wisdom advises us to “buy low,” no point is low enough when there’s hardly any hope that a stock will bounce back. In other words, no matter how much a company lags the market, sometimes it still isn’t attractive.
In my view, that’s the case with Teladoc Health (NYSE: TDOC) and Tilray Brands (NASDAQ: TLRY), both of which have lost more than 90% of their market value over the past five years. Their stocks still aren’t worth buying, though. Here’s what investors need to know about these companies.
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1. Teladoc Health
Teladoc, a telemedicine specialist, experienced a surge in popularity in 2020, as people were confined to their homes and had limited options for accessing medical care. Patients can access basic consultations, prescriptions, and referrals through telemedicine platforms. Teladoc helped provide that, but the company’s fortunes turned in 2021. Demand for its services declined as government-imposed lockdown measures expired. The company also experienced consistent, and sometimes significant, net losses.
Furthermore, BetterHelp, Teladoc’s virtual therapy service and one of its main growth drivers during this period, also started facing challenges. BetterHelp encountered stiff competition, which ate into its market share. Due to all these issues, Teladoc’s revenue has been growing very slowly — if at all — for the past few quarters, and the company remains unprofitable.
Teladoc is looking to turn things around. One bright spot in the company’s recent financial results has been its international expansion efforts. International revenue has been growing at a faster rate than in the rest of its business. If it can continue setting roots in countries outside the U.S., it could exploit meaningful growth opportunities there, or so the argument goes.
Since the company’s ecosystem remains deep — with approximately 102 million integrated-care members — Teladoc also hopes that it can grow revenue by cross-selling additional products to its existing members.
While these plans sound good in theory, it’s doubtful that Teladoc can pull them off. The telehealth specialist’s efforts abroad might increase its already high expenses and make it harder for the company to turn profitable. And while cross-selling more products to existing members might be a great idea, Teladoc has failed to make meaningful progress in the past few years through this route.
Maybe the company will eventually turn that around, but there’s little reason to believe it will. The stock looks likely to remain southbound for some time, which is why it’s best to avoid it.
2. Tilray Brands
Tilray is a leader in the cannabis industry. The company offers a suite of products across both recreational and medical channels in Canada, the U.S., Germany, and several other countries. In Canada, Tilray still has the leading market share.
However, none of that has allowed the company to perform well in recent years. It’s not entirely Tilray’s fault, since the cannabis industry faces significant regulatory challenges in the U.S.; the substance remains illegal at the federal level. Even in Canada, where medical and recreational uses of cannabis are legal, there have been challenges for the business, including oversupply.
Although Tilray has the leading market share in Canada, the landscape has been challenging enough that it hasn’t been able to grow its top and bottom lines consistently.
In fairness, Tilray is now a fairly diversified company. It has expanded its craft brewing business, and also purchases and resells various pharmaceutical products in Germany through its distribution segment. The final business unit, “wellness,” involves the production and sale of hemp-based foods.
That said, diversification has had little impact on improving Tilray’s financial results. So the company continues to rely on potential regulatory progress in the cannabis market. CEO Irwin Simon thinks recreational uses of cannabis will be legal in the U.S. by the end of President Donald Trump’s second term. That’s one reason the company expanded its craft brewing business in the U.S. through acquisition — so it can sell drinks infused with THC and CBD when that happens.
Tilray hopes that once legalization lands, it will be able to hit the ground running and dominate the markets for both recreational cannabis and cannabis-infused drinks, thanks to its existing footprint. However, there’s no guarantee that this scenario will materialize anytime soon. While Tilray’s shares recently soared on news that Trump could reclassify marijuana from a Schedule I substance to Schedule III, that’s some ways away from federal legalization.
It would be progress, to be clear. Schedule I drugs are considered to have the highest potential for abuse; that’s not the case for Schedule III substances. However, marijuana would remain a controlled substance, still subject to heavy regulations at the federal level. But even under Simon’s best-case scenario — not just rescheduling but full-blown legalization — we learned from our neighbors to the north that it’s no guarantee of success for cannabis players.
Tilray could encounter many of the same issues it faced in Canada. These included an initially complicated retail licensing system, stiff competition, and oversupply. In short, there’s little hope that Tilray can bounce back anytime soon. The stock isn’t worth investing in today.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.
