It can be difficult finding a good stock to buy in this red-hot bull market. But if you are patient and wait for a dip in price, whether it is related to industry-specific or stock-specific news, there are moments when you can potentially grab a good stock at a reduced price.
Although the market has remained hot over the past month with the S&P 500 rising almost 4% as of this writing, not every stock has been performing well. Shares of 1Life Healthcare (ONEM) and Carnival (CCL 1.49%) have been falling hard and are down around 20%. Let's take a closer look to see if these stocks are in trouble or if now is the time to pounce and add them to your portfolio.
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1. 1Life Healthcare
1Life Healthcare, better known as One Medical, started to crash back in May when the company released its first-quarter results for the first three months of 2021. The company's sales of $121 million grew 54% year over year and came in ahead of the projections it made in the previous quarter, forecasting its top line to come in no higher than $118 million. The problem was the company's net loss of $39 million, which was much deeper than the $8 million loss it incurred a period earlier. With negative earnings per share of $0.29, it was nearly double the $0.15 loss that analysts were expecting from the primary care provider.
A big reason for the worsening bottom line was that the company's general and administrative expenses rose by 61%, from $40 million a year ago to more than $64 million this past quarter. CFO Bjorn Thaler mentioned only that the company "continued to invest in sales and marketing, technology, and support functions."
The already falling healthcare stock took another hit last month when One Medical announced the $2.1 billion acquisition of Iora Health, which will be funded entirely by shares. The company says the move will allow it to provide services at lower costs while also serving a broader base of customers as Iora Health focuses on the Medicare population.
As of the end of March, One Medical reported 598,000 memberships (up 31% year over year). With the company now adding to its member base through this acquisition, future earnings reports could look much stronger. And given the stock is trading near its 52-week lows, now may not be a bad time to buy the stock as the sell-off looks to be excessive.
2. Carnival
Cruise ship operator Carnival was looking like it might be one of the great comeback stories of 2021. However, its shares have been tanking from highs of more than $31 last month to now back at around $21 -- the level it was at in February.
The decline comes amid growing concern surrounding the delta variant of COVID-19, which threatens to derail the recovery for cruise ship companies. On the company's most recent earnings call on June 24, CFO David Bernstein stated that "our cumulative advanced book position for the full year 2022 is ahead of a very strong 2019, which was at the high end of the historical range."
There is certainly a lot on the line to keep case counts down but in the company's home state of Florida, new case numbers are climbing and are at highs not seen since April. Nationwide, the delta variant is responsible for more than 83% of new cases in the U.S. Carnival is trying to incentivize its travelers to get a vaccine to bring down that risk. On Florida-based ships, unvaccinated travelers will need to pay $150 to cover the cost of a COVID-19 test. In addition, they will also need travel insurance that covers at least $10,000 in medical expenses.
Carnival could be a very promising stock to hold if the economic recovery goes as planned, but that is ultimately going to hinge on what the COVID-19 case numbers are and if rising case counts stall the company's strong booking numbers. Given the uncertainty ahead for Carnival and how jittery the stock may be in relation to COVID-19, I veer toward avoiding it for now and sticking with safer reopening plays.
