The market took a breather near the end of last week, but some stocks have been out of favor for a lot longer than that. There were hundreds of stocks hitting fresh 52-week lows last week, and some of the names might surprise you.
Lumber Liquidators (NYSE: LL), Bitauto Holdings (NYSE: BITA), and Party City (NYSE: PRTY) are some of the stocks trading at their lowest levels in more than a year. Let's explore the reasons for the setbacks, and the challenges that they face in moving higher again in the near future.
Party City has not been in a celebratory mood lately. Image source: Party City.
The retailer of hardwood and other flooring solutions seemed to have gotten past its early 2015 stumble, when a 60 Minutes report calling out the toxic levels of formaldehyde in its China-sourced laminates sent customers -- and shareholders -- scurrying. The stock would go on to nearly double in 2017 as comps started to rise and Lumber Liquidators settled with the California Air Resources Board and the U.S. Consumer Product Safety Commission over the allegations.
The shares would go on to give up all of 2017's gains, as margins started to contract and investors were no longer wooed by positive comps and top-line growth. The 410-unit chain wound up falling short of Wall Street's profit targets in three of the last year's four quarters, and its most recent quarterly outing also treated investors to soft guidance. Its CFO leaving the retailer next month is also not a good look.
Not every Chinese dot-com is bouncing back in 2019. This provider of online content, marketing, and financial services for China's once-booming auto industry is struggling as the economy slows for the world's most populous nation.
Bitauto is gaining market share, and its latest quarter wasn't awful at first glance. Revenue rose 31% and adjusted earnings soared 65%. But its guidance calls for revenue to slow to 14% to 16% growth in the current quarter, problematic deceleration on the top line. The silver lining is that's it's been a long time since the stock has been this cheap. The company is selling for just 9.6 times this year's projected earnings and less than 7.1 times next year's target.
Keeping the theme of disappointing guidance and departing bean counters alive, Party City is also hitting new lows after problematic developments. The chain that sells party favors and other celebration goods has come into some hard times.
Comps have turned negative, and earnings have fallen short in back-to-back quarters -- even after share buybacks that inflated profits on a per-share basis. The chain's near-term outlook doesn't see a recovery anytime soon, and Party City's CFO left the company at the end of last week. With online retailers selling party favors and Halloween costumes for less, it may not be long before the chain is selling the supplies for its own retirement party.
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