Please ensure Javascript is enabled for purposes of website accessibility

3 Stocks That Should Bounce Back in November

By Rick Munarriz – Nov 1, 2018 at 2:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Roku, Grubhub, and iQiyi lost between 24% and 33% of their value in October. This month should be a different story.

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 platform running on a Windows app.

Image source: Roku.

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. 

Rick Munarriz owns shares of Roku, Inc. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GrubHub Inc. Stock Quote
GrubHub Inc.
GRUB
Roku Stock Quote
Roku
ROKU
$59.88 (-1.66%) $-1.01
iQIYI, Inc. Stock Quote
iQIYI, Inc.
IQ
$2.97 (-2.94%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.