Three Prospective Shares Suffering Over 30% Drops, Worth Considering Immediately
In recent years, the S&P 500 has seen a staggering 81% growth and is currently at an all-time high. Consequently, finding quality growth stocks that aren't reaching new highs is a challenging task. Today, even popular stocks like Five Below (-2.85%), The Trade Desk (-1.33%), and e.l.f. Beauty (-2.74%) are dipping below their usual peaks. Yet, there's a silver lining: these stocks may just be experiencing temporary setbacks rather than long-term failures.
1. Five Below
While the company's revenue growth is undeniable, with a 12% increase in the first three quarters of its fiscal 2024, there are concerns about its financial results in a changing economic landscape. Five Below made its mark by offering items at $5 or less, which is becoming increasingly difficult as inflation remains a persistent issue. Additionally, 40% of its products in fiscal 2023 were sourced from international vendors, which could be impacted by escalating trade tensions.
Despite these hurdles, Five Below's balance sheet is robust, equipped to handle challenges. Its cash reserves exceed $200 million, and it has no debt, providing the company with the means to make necessary adjustments. With strong growth potential and a solid financial foundation, it seems likely that Five Below will adapt and recover.
2. The Trade Desk
In a surprising turn of events, The Trade Desk underperformed its financial guidance for the fourth quarter of 2024, generating revenue of $741 million instead of the expected $756 million. Consequently, the stock price took a significant hit, dipping more than 40%. However, founder and CEO Jeff Green remains optimistic about the company's future growth potential.
The Trade Desk's digital advertising market has a total addressable market worth approximately $1 trillion compared to the $12 billion on its platform. Because of this immense opportunity, the company has assembled an exceptional executive team capable of overcoming challenges and boosting growth. With exceptional past results, investors should view the recent earnings miss as a temporary anomaly.
3. e.l.f. Beauty
Despite some concerns surrounding e.l.f. Beauty, like a slowdown in same-store sales and potential impact from escalating trade tensions, the company has still managed impressive revenue growth. e.l.f. Beauty has taken market share in the mass beauty category by supplying affordable beauty products, and its international growth is just beginning.
In the last fiscal quarter, e.l.f. Beauty reported a 20% decline in share value as a result of softer demand in the mass beauty category and weaker-than-expected sales in January. However, the company has exhibited a consistent revenue growth rate of 31.2% year-over-year and remains optimistic about the future, attributing its growth to gains in digital, color cosmetics, skincare, and international markets.
While each of these stocks comes with their unique set of challenges, there are also reasons to believe that they can overcome their current hurdles and continue to grow. Investors may find these stocks appealing at their current reduced prices.
- Considering the volatile market conditions, e.l.f. Beauty's board of directors announced a reorganization strategy for 2023, aiming to streamline operations and enhance profitability. This move, combined with the company's strong online presence and expanding international market, could potentially lead to a rebound in its share price.
Maximizing investment opportunities in the current market requires a thoughtful approach, considering both risks and potential rewards. The underperformance of stocks like Five Below, The Trade Desk, and e.l.f. Beauty might present a chance for savvy investors to purchase shares at a reduced price, with the expectation of potential long-term gains.
