Last month was a good one for the Nasdaq Composite (^IXIC 2.02%) but a great one for a handful of Nasdaq-listed stocks. Whereas the index advanced 4.1% in July, Rivian Automotive (RIVN 6.10%), Roku (ROKU -10.29%), and Symbotic (SYM 1.62%) rallied 66%, 50.5%, and 48.4%, respectively.
Circumstances and news helped. All three stocks had suffered significant setbacks in June, leaving them ripe for a rally the following month. And while investors responded bullishly to last quarter's numbers from Roku and Symbotic, they simply fell back in love with Rivian's electric vehicle (EV) prospects.
The question is, are any of these stocks still worth buying after last month's big gains? Or, maybe the more relevant question to ask is whether or not any of these stocks are currently worth buying at any price? Sharp pullbacks from all three tickers in the meantime suggest no...at least not right now.
Why these stocks rallied
Big rallies shouldn't be intimidating to true long-term investors. After all, if you're thinking in five-year time frames (or more), what happens to a stock in a single month doesn't really matter. You're looking for much bigger, longer-term gains.
On the flip side, it's short-sighted to chase hot stocks simply because they're hot. More specifically, you shouldn't presume that bullishness will automatically beget more bullishness. With well-watched story stocks like these three, it often doesn't.
Take the steep sell-off from Rivian since the end of last month as an example. As of the latest look, the stock's down more than 20% from July's close despite topping last quarter's sales and earnings estimates and in spite of raising its 2023 electric vehicle production outlook from 50,000 to 52,000 vehicles. The weakness looks and feels like profit-taking after last month's advance.
Ditto for Roku. Last quarter's top and bottom lines were both better than expected -- as was its addition of 1.9 million new Roku account users -- catapulting the stock higher late last month. But after having had some time to think about the numbers, investors appear to be having more doubts. Cost cutting is coinciding with slowing and even stagnant user and average revenue per unit (ARPU) growth, and the company remains in the red, reporting an operating loss of $126 million for the three-month stretch ending in June. It's not clear there's room for cost-effective growth in the future.
As for artificial intelligence robotics company Symbotic, nearly all of the stock's big gains following the release of its impressive fiscal third-quarter results have been given back. The organization continues to suffer net losses, even if last quarter's earnigs before interest, taxes, depreciation, and amortization (EBITDA) loss of only $3 million on sales growth of 77% is markedly better than the year-earlier Q3 loss of $22 million. The stock's gains since the end of last year arguably already priced Q3's healthy results in. Now short-term shareholders are using the most recent surge as a chance to get out.
The ultimate questions remain, though: Can you still buy any or all of these stocks, and if so, should you?
The case for and against buying these winning stocks
If you were interested in owning any of these names prior to last month's big gains, you can still buy them now. In fact, you should buy them specifically because of their big pullbacks in the meantime. Here's your rare second chance to do so near their pre-surge prices.
If you weren't actually interested in buying any of these before July's big gains, however, the fundamental bullish arguments haven't changed much in the meantime. Roku's been running into a stiffening headwind for a while now and still is. Symbotic's revenue growth and shrinking EBITDA loss isn't exactly new either. Analysts are calling for enormous sales growth this year and strong sales growth in 2024 to be accompanied by continued narrowing losses and even a breakeven by next year. But this outlook was in place before last month.
And Rivian remains something of an enigma in its own right. Electric vehicles are exciting, and the company's making obvious fiscal progress as it scales up. It's still booking massive losses though, and the EV market is getting mighty crowded. There's no assurance it will ever achieve enough scale in time to become self-sustainingly profitable. But that was clearly the case before last month.
So no, July's gains followed by this month's big pullbacks don't inherently make these stocks worth buying.
What might be the most prudent move
Maybe the best course of action from here is just putting all three of these names on your potential watchlist of stocks to possibly buy at a later time. In the interim, you'll not only want to wait for these stocks' current volatility to be tamped down, but you'll want to gauge their growth and future profit prospects without being influenced by the misleading hype surrounding them.
Symbotic currently offers tangible hope in this regard. Rivian and Roku, however, are different stories. The electric vehicle market's growth is slowing down despite recent price cuts from several major manufacturers, while some consumers are starting to say they don't need any more streaming services in their lives. In fact, recent findings from Hub Entertainment Research suggest consumers are now -- for the first time ever -- watching fewer total video services than they did in the prior year, with roughly one-fourth of U.S. consumers conceding they've got more streaming subscriptions than they can regularly tune into.
The biggest takeaway for investors, of course, is that it always pays to take a step back and put one month's gains from a particular stock in the proper context.
