The S&P 500 has rallied more than 10% to historic highs this year, but it wasn't all sunshine and rainbows for certain stocks. Let's examine three stocks which were cut in half over the past year, and whether or not they can rebound in the future.
GoPro (GPRO -1.66%) fell over 50% this year, and trades at a 60% discount to its IPO price of $24. The action camera maker already slogged through a rough 2015, when it launched a mix of low-end, mid-range, and compact cameras to reach more users instead of introducing flagship successors to its popular Hero 4 cameras.
Earlier this year, GoPro reduced its portfolio to just three cameras, and claimed that the launch of its Karma drone and Hero 5 cameras would get its growth back on track. Investors held on through four straight quarters of year-over-year sales declines to see if that would happen, but the outlook looks grim. When the Karma finally arrived in late September, units dropped out of the sky and prompted a full recall. Shortly after it introduced the Hero 5, GoPro pulled the device from Amazon in a pricing dispute which was only recently resolved.
GoPro laid off 15% of its workforce and shuttered its media division to offset those losses, but downsizing in the face of tough competition from rival action camera and drone makers could have devastating consequences. Analysts expect GoPro's revenue to fall 24% this year before possibly rebounding 18% next year, but big headwinds could blow that recovery off course.
Cloud platform provider Twilio (TWLO 3.58%) had a stellar debut, surging from its IPO price of $15 in June to almost $70 in September. Unfortunately, fundamental gravity caught up to the stock -- which traded at over 20 times sales at its peak -- and it plunged back to around $30. The company's decision to price a secondary offering at $40 also exacerbated that decline and caused short interest to surge.
However, much of that decline was attributed to overheated valuations instead of actual problems with Twilio's business. Twilio's cloud platform lets apps -- like Uber, Airbnb, and Facebook's WhatsApp -- connect their mobile apps to mobile phone numbers. It's the service that lets you message or call an Uber driver from within the app, or add contacts from your phone numbers in WhatsApp.
In the past, developers built those services from scratch, and the results were often buggy and hard to scale. But by offering carrier connections as a cloud-based service, Twilio makes it easy for any "no stack" app developer (which outsources non-core features to companies like Twilio) to integrate mobile phone numbers and SMS into an app. Demand for Twilio's best-in-breed platform is clearly surging -- it expects up to 62% sales growth this year, compared to 88% growth in 2015.
58.com (WUBA), the largest online classifieds platform in China, shed 50% of its market cap this year. Roughly half of 58.com's revenue comes from its real estate listings, while the rest comes from job and automotive listings. Its 58 and Ganji sites are multi-category classified ad platforms, and Anjuke is its real estate listing platform.
On the surface, 58.com's growth looks astounding. Revenue rose 44% annually last quarter, thanks to a 33% increase in membership revenues supported by 38% growth in paid membership accounts. Unfortunately, that also represented its slowest year-over-year growth rate since its IPO. The company attributed that slowdown to a wobbly Chinese economy and a tough real estate market.
Analysts expect 58.com's revenue to grow 59% this year, but slow to just 29% growth next year. That growth looks decent, but 58.com's price-sales ratio of 4.3 is comparable to other Chinese listing and portal sites -- like Autohome and SINA -- which both posted accelerating sales growth over the past few quarters. This means that 58.com will likely stay down until its year-over-year growth accelerates again.
Are any of these stocks bargains?
It's tempting to consider GoPro, Twilio, and 58.com contrarian plays after their big drops this year. However, all three companies face tough questions about their future growth. Of the three, Twilio has the brightest future. However, I recently warned that Twilio could still drift lower, due to its valuations and lockup expiration later this month.