Every year there are winners and losers in the stock market. And for bargain-shopping investors, sometimes there are excellent businesses that have fallen in the latter category. There are always systemic factors outside the control of individual companies that can cause them to stumble in the short term.
Indeed, the following three stocks -- Chewy (CHWY 2.49%), Chegg (CHGG 1.08%), and Pinterest (PINS +1.32%) -- all fall into that category. The coronavirus pandemic and its side effects have created difficulties for each of the three companies. This can be an excellent opportunity to buy them at a discount.
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Supply-chain disruptions are harming this online pet retailer
Chewy's price is down due to the one-two punch of reopening economies. First, it's causing sales growth to slow as people divert some spending to brick-and-mortar retailers. Indeed, revenue increased year over year by 51% in the quarter ended January, 32% in the quarter ended April, 27% in the quarter ended July, and 24% in the most recent quarter ended October.
Second, it's causing supply-chain disruptions that raise Chewy's input costs. To management's credit, Chewy actually increased gross profit margins by 90 basis points despite rising freight costs and higher product inflation.
Chewy still has solid, long-term prospects. The company has 20.4 million active customers who continue to increase their spending on Chewy.com. Owning a pet is a long-term commitment, so Chewy's customers could potentially stay with it from several years to over a decade.
The stock is down 42% year to date in 2021, a nice discount for bargain shoppers.
College students preferred remote learning
Chegg is a leading, online student-help platform. The education-technology company focuses primarily on assisting college students with their curriculum. Students can benefit from Chegg's assistance whether they are taking online courses or in person.
Chegg's stock is down in 2021 because colleges started requiring students to return to classroom learning. That is a turnaround from 2020 when most students could take courses online. Students did not welcome the change in 2021, and college enrollment has decreased. Of course, that's not good news for Chegg.
Here is Chegg CEO Dan Rosensweig delving deeper into the causes for decreasing student enrollment: "In late September it became clear to us that the education industry is experiencing a slowdown that we believe is temporary. This industrywide dynamic was unanticipated and is a direct result of the COVID-19 pandemic. A combination of variants, increased employment opportunities and compensation, along with fatigue, have all led to significantly fewer enrollments than expected this semester."
Yet the company remains a solid, long-term investment. It has over 70 million pieces of proprietary content that is highly regarded by students, which creates a strong moat against competitors.
The stock is down 69% in 2021, a massive price cut for bargain-shopping investors.
Folks are not pinned at home anymore
Pinterest is another stock having difficulty in 2021. Investors started retreating from the image-based social media app when it began shedding monthly active users. The losses coincided with worldwide economic reopenings. As folks were spending less time at home, they had fewer occasions to interact with Pinterest's platform.
Pinterest's total monthly active users have dropped from 478 million to 444 million over its latest two quarters. Thankfully for shareholders, the losses appear to have stopped. According to management, as of Nov. 2, Pinterest has 447 million MAU, a slight increase from the end of its fiscal third quarter on Sept. 30.
Also positive is that while the number of users is down, the average revenue per user (ARPU) has been steadily rising. In its most recent quarter ended Sept. 30, ARPU increased to $1.41, up from $1.03 at the same time last year.
The stock is down 43% year to date, making it well worth considering at this point.
Each of these three stocks has taken a beating in 2021 and is down more than 40% for the year. They are all down due to short-term consequences that make them ideal candidates for bargain shopping investors in 2022.
