With the market up in 2023, it can be hard to find individual stocks that seem like screaming bargains. Many members of the Nasdaq Composite have jumped by 15% or more over the last few months as investors became less worried about a sharp recession developing later this year.
Deals are available, though. Below, we'll take a closer look at a few stocks that have declined in the past year by more than the S&P 500's 6% loss over that period. Read on for some good reasons to buy Costco Wholesale (COST -0.56%), Walt Disney (DIS -1.86%), and Etsy (ETSY -1.03%).
1. Costco
This big-box retailer has a reputation for rarely going on sale, but Costco's stock is down 14% in the past year. One of Wall Street's biggest concerns is slowing growth. Comparable-store sales rose by less than 1% in the month of March, after all. Shoppers are spending less on discretionary items like jewelry and consumer electronics, management said in its last conference call with investors. Slowing inflation could be pressuring customer traffic, too.
But Costco's long-term outlook is bright. A record proportion of its members are renewing their subscriptions, demonstrating excellent customer loyalty. And those membership fees protect earnings from big declines during consumer spending slumps. These factors mean the market share leader is highly likely to return to its winning ways over time.
2. Disney
Disney may be one of the most dominant entertainment companies on Earth, but its expensive pivot toward direct-to-consumer streaming has pressured earnings in the last few years. After routinely running at over 20% of sales, operating profit margin has collapsed to mid-single digits recently, dragging the stock price down with it.
DIS Operating Margin (TTM) data by YCharts
Still, Disney has the resources it needs to engineer a rebound. Cost cuts are helping put the streaming service back on a path to profitability, and earnings help will also come from powerhouse segments like the movie studio and theme park divisions.
These niches are all fed by -- and provide support to -- a massive platform for the development and launch of intellectual property that no rival could hope to challenge. That competitive moat should lead to strong shareholder returns over the long term, notwithstanding worries about the next few quarters.
3. Etsy
Etsy has carved out a special niche in e-commerce by focusing on handmade or vintage items -- and business soared during the early stages of the pandemic.
However, the shares are down 14% so far in 2023 thanks to some short-term concerns on Wall Street. Sure, the marketplace giant's sales declined in the most recent quarter due to a pandemic-related growth hangover. Etsy's buyer pool shrank by about 1% for both Q4 and the full 2022 year as well.
Those losses put the company ahead of peers like eBay, though, which shed 9% of its buyer pool last quarter. Etsy trounces eBay in its take rate, too, which suggests it could become much more profitable over time as it gains scale.
Investors buying into the stock here will have to be patient as they wait for that bullish thesis to play out. Most Wall Street pros are projecting sales growth of just 8% this year before revenue gains accelerate starting in 2024. That cloudy short-term outlook isn't a concern for investors with a multi-year time frame, but it has helped drive a discount on this stock.
