October had more tricks than treats for investors. The markets started clawing their way back during the final two days of the month, but some stocks have still dug themselves into pretty big holes. Many will stay there, but let's size up the ones that should not.
Roku (ROKU -1.66%), Grubhub (GRUB), and iQiyi (IQ -2.94%) all tumbled by more than 20% in October. There are catalysts in play for all three stocks to bounce back in November. Let's explore why they fell out of favor -- and what it will take to win their way back.
Roku -- Down 24%
The streaming-video pioneer rewound nearly a quarter of its value last month. October got off to an encouraging start, as Needham analyst Laura Martin boosted her price target on the shares from $60 to $85. Despite the stock more than tripling over the previous 12 months, she was encouraged by Roku's excellence in execution and played it up as a potential takeover target. Then the wheels started to come off.
CNBC reported that a tech giant with a rival platform was getting ready to launch, and that stirred up enough uncertainty to send the stock cratering when the market itself was correcting. Favorable mid-October developments that included an RBC Capital upgrade and a resumption of device sales in Mexico didn't help stop the bleeding.
November should be different. Roku reports financial results next week, and it has blown Wall Street's profit targets away for three consecutive quarters. Roku is rapidly evolving into a software platform of choice on its devices as well as third-party smart TVs. A strong report should turn sentiment around.
Grubhub -- Down 33%
The fast-growing provider of online takeout and delivery orders shed a third of its value last month, and most of the damage came the day after it reported its financial results. Grubhub saw its revenue and earnings top expectations. Guidance was solid. There was some concern about an uptick in promotional activity to keep growing, but the pessimism seems overdone.
A few analysts have chimed in over the past few days, upgrading the stock in light of the sell-off. Another potential catalyst is Grubhub's plum role as a juicy incentive in a hot new charge card, something that should really spice up the current quarter.
iQiyi -- Down 27%
China's leading video service keeps growing at a blistering pace, but investors weren't satisfied with this week's mixed quarterly report. iQiyi posted a larger deficit than analysts were expecting. Revenue rose according to plan, but strength in its premium subscriptions and premium content pay-per-view was partly held back by a surprising dip in ad revenue.
The future should get bright for iQiyi. Investors won't hate Chinese growth stocks forever, and iQiyi's rapidly evolving premium subscriber base should provide revenue growth stability in the future. Credit Suisse also upgraded the stock on Thursday, tempted by the stock trading back to levels last seen shortly after its springtime IPO.