A new year means new opportunities. Some 2024 market winners will flop, and some losers will bounce back.
The S&P500 ends the year with an increase of about 24%, after interest rates fell last week following the Federal Reserve’s latest interest rate decisions. That’s still an excellent gain for the year. What will happen next year? Nobody knows. There will undoubtedly be some surprises. Roku (NASDAQ: ROKU), Honestly (NYSE:W)And Platoon interactive (NASDAQ: PTON) are three beaten-down stocks that could stage a recovery.
Roku shares have been a disaster in recent years, and while they’re up nearly 50% in the past six months, they’re still 83% below their all-time highs. Will it ever come back there?
When Roku stock soared, it was a bull market with easy money and investors who couldn’t imagine the market would ever collapse. But it did, and investors today are wisely more cautious. This market is less likely to support high profits if the price is not tied to tangible results or assets. In the case of Roku, the market may be too cautious and there is room for further price appreciation.
Several factors currently work in favor of this theory. It continues to grow its membership base and revenue, while reducing costs, and improving profitability. The third quarter was the fifth consecutive quarter of both positive adjustments earnings before interest, taxes, depreciation and amortization (EBITDA) and positive free cash flow. A positive net result may be just around the corner.
Roku also benefits from moderating inflation and thus increasing advertising budgets. There is no doubt that it has an attractive advertising platform, which more and more viewers are joining. Viewing hours on the Roku Channel, the free, ad-supported channel, increased 80% year over year in the third quarter. That’s fueling some of the recent gains. The platform segment, which consists primarily of the advertising sector, is the company’s higher-margin business, and that growth is driving strong profitability.
At one price-sales ratio from less than 3, Roku looks poised to jump ahead in 2025.
Wayfair is in the same boat as Roku, but even worse, its pandemic outperformance has not only been followed by declining revenues, but sales have actually fallen. However, Wayfair’s online home furnishing platform seems like a no-brainer, and the market still thinks it can make a comeback.
It’s been a tough few years, most recently due to a sluggish housing market. People are still waiting to buy a new home before furnishing it. This hasn’t helped Wayfair’s already dire situation, but despite the challenging environment, it’s making steady progress where it should be. It reduced costs in the third quarter year-over-year, reduced operating loss and improved net loss.