This past month was brutal for investors, but some stocks have really taken it on the chin. Nearly 1,000 stocks surrendered more than 20% of their value in February, and some could bounce back sooner rather than later.
Snap Interactive (SNAP 5.51%), Royal Caribbean (RCL 3.00%), and Wayfair (W 3.30%) are three of last month's sinkers that have a strong case to start clawing their way back. Let's take a closer look at how all three can bounce back in March.
Image source: Royal Caribbean.
Snap Interactive: down 23%
Snapchat's parent company was one of last year's biggest winners among social media stocks, nearly tripling with a 196% pop in 2019. Snap stock was inching higher in January, but it's a different story in February. Last week's general sell-off didn't help, but the initial blow came three weeks earlier when Snap posted mixed financial results.
Revenue rose 44% to hit $561 million in the fourth quarter, just shy of the $563 million analysts were targeting. Snap's outlook for the current quarter also came in lighter than Wall Street was targeting. Snap rolled out a better-than-expected adjusted profit, but that wasn't enough for investors placing more attention on the top than the bottom line.
The reason to still be excited about Snap is that Snapchat isn't going away. Investors were leaving it for dead a couple of years ago when user growth stalled, but daily active users have risen 17% to 218 million over the past year. Revenue is growing substantially faster because of Snapchat's success at monetizing its traffic. Last year's pop wasn't a fluke. Snap is still an ascending platform.
Royal Caribbean: down 31%
All three of the largest cruise line operators have taken at least a 20% hit in February, and Royal Caribbean has been the hardest hit by surrendering nearly a third of its value. The headlines aren't kind for the industry. The quarantine of the Diamond Princess -- a non-Royal Caribbean ship -- is making folks uneasy to hit the open waters.
Cruise lines including Royal Caribbean have had to cancel some sailings, and the near-term fear is that the industry will need to discount aggressively to fill last-minute cabin openings. It's fair that cruise line operators are getting marked down, but Royal Caribbean -- consistently a top performer -- shouldn't be trading this low. Royal Caribbean boosted its dividend last year, lifting its yield to 2.9%. The stock has taken on water to the point where it's now yielding a hearty 3.9%, a payout that's easily covered by earnings with the stock trading at less than eight times its forward profit target.
The tide will turn for cruise travel, and in the meantime investors can buy into the class act of the industry for a single-digit earnings multiple. A yield of nearly 4% will make the wait worthwhile.
Wayfair: down 33%
It's easy to be down on Wayfair. The online furniture retailer waited until the final day of February to post its latest quarterly results, and it was problematic. Growth decelerated again, as revenue gains slowed for the fifth time in the past six quarters. Most furniture merchants would love to be growing sales at a 26% clip, but with losses mounting it's not a stretch to wonder if the model even works.
I believe the model will work. Wayfair has cracked the code for heavy big-ticket furniture items, something that even the world's largest retailer has struggled to master. Wayfair isn't a third of the company that it was when the month began.
One of the keys to investing successfully is to recognize when the market's offering up opportunities to buy quality growth stocks at hungry prices. Hear that sound? It's the dinner bell.
