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By Vince Martin
| March 9, 2017
It’s a bull market. Macroeconomic sentiment has turned notably positive since the election. Major indices are at all-time highs, with the Dow Jones Industrial Average setting 12 consecutive record highs for the first time in almost 30 years.
And yet, some stocks have somehow been left behind.
With some investors seeing the current market as a bit overheated, stocks not participating in 2017’s gains appear particularly vulnerable. After all, if a stock can’t gain in this environment — with so many bullish investors — what happens when broad market sentiment inevitably reverses?
Earlier we looked at seven stocks set to hit all-time highs in this strong bull market. Now, we will take a look at seven stocks that seem likely to hit their all-time lows this year, even if the markets continue to reach new heights.
Prices and data are from the original InvestorPlace story published on March 6, 2017. Click on ticker-symbol links in each slide for current prices and more.
All-time low: $5.62 (Feb. 9, 2017)
Fitbit Inc. (FIT) stock has stabilized over the past month, despite an ugly Q4 earnings report.
Results for the key holiday quarter came in below analyst expectations; 2017 guidance was worse. Fitbit is guiding for adjusted EBITDA of negative $50 million to $100 million next year. And that figure both relies on guidance from a company that missed terribly in 2016, and excludes more than $100 million in stock-based compensation, which will dilute existing shareholders by 8% at current prices over just the next 12 months.
From here, FIT stock looks less like a stock that has hit bottom than one simply waiting for its next leg down.
Competition isn’t going anywhere, whether it’s Garmin Ltd. (GRMN) or, of course, Apple Inc. (AAPL), as Fitbit moves into smartwatches. A $6 share price might sound cheap, but a $1.4 billion market capitalization for an unprofitable company hardly sounds like a bargain.
I’ve argued in the past that investors should sell even the modest bounce in FIT. With the stock needing just a roughly 8% decline to set a new all-time low, FIT is just one more poor quarter away from reaching new depths in 2017.
Jungle Jim’s International Market via Flickr
All-time low: $9.21 (Aug. 24, 2015)
Like Fitbit, Vera Bradley, Inc. (VRA) is just a few percentage points above its lows. Like Fitbit, VRA has fallen to the single-digits from highs above $50 (though VRA’s all-time high came back in 2011).
But, from here, Vera Bradley’s positioning seems even worse than Fitbit’s.
The core business — selling handbags in regional malls — is under attack from all sides. Better-known brands with longer, grander histories such as Michael Kors Holdings Ltd (KORS) and Coach Inc (COH) are themselves struggling. Mall traffic is plummeting. Handbag demand appears to be declining across the board, perhaps due to the “athleisure” trend driving growth at Lululemon Athletica Inc. (LULU).
And yet Vera stock isn’t cheap — VRA still trades at 11 times its fiscal 2017 guidance plus its $2-plus per share in cash. That’s a premium to KORS, for instance. Yet Vera Bradley sales are plunging: Sales per square foot, based on guidance, will drop almost 40% in just four years by the end of this fiscal year.
A turnaround plan in its third year has made little difference; Vera Bradley remains a declining business. And the same seems likely to be said for VRA stock.
All-time low: $7.95 (March 6, 2016)
GoPro Inc. (GPRO) is trading under $9 for the fourth time in its nearly three years as a public company, but breached the $8 level for the first time Monday, March 6.
This has been a stunning collapse for a stock that hit an all-time intraday high of $98.47 in October 2014.
The last three times GPRO broke $9, the stock did at least manage to rally, somewhat. But the fourth time may be the charm for GoPro stock. A downgrade from Citigroup last Thursday sent shares tumbling, with analyst Stanley Kovler saying it would be “at least” two years before GoPro turned profitable.
GoPro simply hasn’t been able to pivot away from its core “action sports” demographic and camera product. The Karma drone has been beset with technical problems, with GoPro having to recall the devices. Privately held Chinese competitor DJI has taken top billing in the market, and still appears well ahead of GoPro from a development and pricing standpoint.
GPRO at least is posting revenue growth, unlike Fitbit, but again remains sharply unprofitable. And its struggles, along with those of Fitbit, raise the question as to whether a single-product company can survive, let alone thrive, in the modern consumer electronics space. At the moment, that strategy looks difficult.
Barring a buyout, GPRO stock seems likely to stay below $9 this time around, and continue setting all-time lows.
David via Flickr (Modified)
All-time low: $10.60 (Feb. 3, 2017)
FireEye Inc. (FEYE) is another formerly hot tech stock that has fallen back to Earth. FEYE’s initial public offering in September 2013 was priced at $20; shares cleared $90 within six months.
Since then, though, it has been all downhill for FireEye.
The problem for FireEye, and the reason to expect FEYE shares to trend lower, is that the company can’t blame its customers. Cybersecurity is a hot topic and a focus of corporate spending, particularly after the high-profile hack of Sony Corp. (SNE).
But those customers are going to FireEye rivals: Fortinet Inc (FTNT) posted 22% billings growth in its December quarter. FireEye, meanwhile, saw a 14% decline in the same period. That, combined with the departure of both its CFO and its chairman, led FEYE stock to plunge.
I’m skeptical that things will get better for FireEye any time soon. Many investors are looking for a sale, but that seems unlikely. At the very least, FireEye needs to stabilize its top line before a larger player will become interested — and 2016 results, along with new leadership, suggest that will take some time.
With FireEye barely 3% above all-time lows, investor patience seems likely to wane at least enough for FEYE to set a new all-time low — and likely reach single digits.
Albert Herring via Wikimedia
All-time low: $5 (Dec. 2, 1980)
It might seem a bit unfair for J C Penney Company Inc. (JCP) to be on this list. The company is coming off a decent fourth-quarter earnings report last month — decent at least by department store standards, anyway. JCP kept same-store sales flat in its fiscal 2016 (ending Jan. 28 of this year). Adjusted EPS was positive, if barely so, at 8 cents.
And JCPenney has made some progress. In fiscal 2013, Adjusted EBITDA was negative $641 million; that figure not only turned positive but cleared $1 billion in fiscal 2016. Sales figures have been better than peers like Macy’s Inc. (M) and (of course) Sears Holdings Corp. (SHLD).
But there’s a reason JCP stock is pushing a 30-month low — and nearing levels not seen since the early 1980s.
Outperforming Macy’s and Sears isn’t exactly a high bar to clear at the moment. Department store and mall traffic continues to decline; promotional activity puts pressures on gross margins, which fell 30 basis points in JCP’s FY16.
The secular attack on brick-and-mortar retailers from Amazon.com, Inc. (AMZN) and other online retailers is not abating — in fact, it’s accelerating. And that could push JCP shares down even further. Another 20%, and JCP will have reached its lowest levels in nearly 40 years as a publicly traded company.
Shake Shack via Wikimedia
All-time low: $30.90 (Oct. 26, 2016)
To be fair, Shake Shack Inc. (SHAK) stock did price its IPO at $21 — but it opened at $47 and never traded below $45. The one-time growth darling has seen same-Shack sales (as the company calls them) decelerate, with 1.6% growth in Q4 leading SHAK shares down near October 2016 lows.
The concern with Shake Shack is not so much slowing growth, as it is the valuation. The stock still trades at around 20 times 2017 EBITDA estimates, and some 60 times consensus EPS. That’s a multiple that offers little room for error — or, indeed, anything other than perfect execution.
To be honest, it’s not as if Shake Shack is performing that poorly: Margins are expanding, Shack count is increasing and sales are growing. But it appears investor expectations simply got too high — and the current valuation implies that may still be the case.
Indiana Public Media via Flickr
All-time low: $3.73 (July 27, 2015)
The business model at Angie’s List Inc (ANGI) sounds like a winner. A site that provides verified reviews of local contractors, plumbers and other professionals would seem to fill a definite need.
But Angie’s List hasn’t quite been able to get it done. A combination of tough competition and self-inflicted errors have led ANGI stock to a roller-coaster ride — and not the fun kind. After a disappointing Q4 earnings report last month sent Angie’s List down 9%, ANGI now sits near 52-week lows. And while all-time lows require another roughly 30% decline, that’s not nearly as unlikely as it seems.
Angie’s List isn’t profitable, despite having spent hundreds of millions of dollars on advertising, and driving member growth in 2016. Advertiser dollars are down, as are renewal rates. Competition remains intense, with IAC/InterActiveCorp’s (IAC) HomeAdvisor taking share, and other, more app-friendly, companies entering the space as well.
Meanwhile, the door to the long-identified exit for Angie’s List — a sale of the company — may be closing. IAC offered $8.75 per share for Angie’s List in late November, which ANGI quickly turned down. Rumors of a second bid persisted, but IAC now appears to have walked away.
With Angie’s List coming off a difficult 2016, InterActiveCorp may choose to take market share from Angie’s List instead of buying it. And that could push ANGI stock to fresh lows.
This article is by Vince Martin of InvestorPlace. As of this writing, he held none of the aforementioned securities.
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