Wall Street exchanges are hitting fresh highs, but not every stock has been invited to the party. Some once-popular investments have fallen out of favor, and less than 10% of exchange-listed stocks are now trading at least 50% off their recent highs.
Shares of Stitch Fix (SFIX 3.69%), MicroStrategy (MSTR -5.45%), and Fastly (FSLY -0.47%) had surrendered more than half of their peak values by the end of last week. They would have to more than double to get back to where they were just a few weeks or months ago. Let's see why they may finally be bottoming out after suffering brutal corrections.
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1. Stitch Fix: Down 57%
It was just two months ago that the market was toasting the turnaround at Stitch Fix. The tech-savvy platform that delivers stylist-curated apparel "fixes" emerged out of the pandemic with just a single quarter of negative sales growth for the three-month fiscal period that ended last May.
Revenue bounced back with a 3% top-line increase for the fiscal fourth quarter that ended in August, followed by a 10% increase three months later. The pace of the recovery continued to accelerate earlier this month with a nearly 12% year-over-year gain for its fiscal second quarter, but this was where the stitching of the Stitch Fix turnaround started to come undone.
Analysts were holding out for a 13% jump in sales in the disappointing report. The current quarter's outlook was even worse. The $505 million to $515 million that Stitch Fix sees in net revenue for the fiscal third quarter may be a huge 37% year-over-year jump, but this is also coming off that one dark quarter in the springtime of last year when sales slipped early in the COVID-19 crisis. More importantly, Wall Street pros were holding out for a 41% surge in net revenue. There are some near-term supply chain challenges, and that's slowing deliveries and delaying sales.
By slashing its guidance for the fiscal year earlier this month Stitch Fix broke the cardinal rule in every turnaround strategy. However, it's hard not to like Stitch Fix now that it's out of favor. Folks are going back to offices, classrooms, and other social scenes. They're going to start caring about what they wear again. The latest round of stimulus checks will also find some of those proceeds tapped for wardrobe updates. Stitch Fix will be fine.
2. MicroStrategy: Down 53%
It's fair to say that MicroStrategy bulls got a bit greedy earlier this year when Bitcoin (BTC -3.38%) was soaring. MicroStrategy may be a fledgling provider of enterprise analytics, but its appeal these days has been largely CEO Michael Saylor's penchant for converting the cash on its balance sheet to Bitcoin.
It's not MicroStategy's core business that made the stock peak at $1,315 in early February. The company's core operations remain profitable, but it has cranked out six straight years of single-digit declines in revenue. The real catch here is the $2.21 billion it has invested over time to acquire 91,326 Bitcoin.
With Bitcoin trading at roughly $58,000 on Monday morning we're talking about $5.3 billion worth of tokens. MicroStrategy's enterprise value is currently $6.5 billion, so the underlying business is almost a bonus at this point if you believe that the value of the leading crypto will keep rising. The stock's price at its peak last month was nuts, especially since Bitcoin has appreciated by more than 20% since then. The disconnect is just as jarring now on the other end, especially with Bitcoin gaining momentum again.
3. Fastly: Down 52%
I was surprised two weeks ago to see Fastly, one of the former tech darlings, trading at least 40% off earlier highs. Naturally the shares are starting to seem even more tempting now that they are 52% below where they were when the content delivery network hit a high-water mark in early October of last year.
The initial Fastly sell-off was tied to losing TikTok as a top account in the aftermath of the trade war between the U.S. and China. TikTok was generating more than a tenth of Fastly's business, but this isn't a deal breaker. Fastly still sees revenue climbing 29% to 32% this year. This is a step down from last year's 45% increase, but the market markdown appears overdone.
It's true that this is seen by many as a cutthroat niche. I'm also not happy to see Fastly's net retention rate and dollar-based net expansion rates decelerate. However, reports of Fastly's death appear to be exaggerated. Every quarter bears watching closely, but this is not a broken company.
