A Bull Market Might Be Coming, but These 2 Stocks Aren't Along for the Ride Just Yet

The stock market once again gained ground on Tuesday, extending an impressive rally to begin the month of November. Again, the Nasdaq Composite (^IXIC 2.02%) led the way with gains of almost 1%, but the Dow Jones Industrial Average (^DJI 0.40%) and S&P 500 (^GSPC 1.02%) also managed to post modest increases on the day.

Data source: Yahoo! Finance.

Some investors have decided that interest rates have topped out and a new bull market is beginning. Yet even if that's the case, that doesn't mean that every stock is going to be able to move higher in line with the broader market.

Indeed, even on a positive day, shares of Shockwave Medical (SWAV 0.31%) and Melco Resorts (MLCO 0.47%) were both down double-digit percentages on Tuesday. Here's why they didn't support the bullish case.

Shockwave keeps growing, but investors want more

Shares of Shockwave Medical were down 17% on Tuesday. The drop came even as the medical device maker reported third-quarter financial results that showed considerable growth in key metrics.

Shockwave reported revenue of $186 million in the third quarter, which was up 42% from year-earlier levels. Gross margin improved slightly, although a big jump in operating expenses kept net income roughly flat at $35 million. That worked out to $0.92 per share in earnings, also unchanged from the year-ago period.

Shockwave cited increased demand for its products, both in the U.S. and internationally, for the boost to sales. However, the company expanded its number of sales personnel and other workers to support broader growth initiatives, and that played a pivotal role in higher overall costs. Looking ahead, Shockwave expects to see full-year revenue in a range between $725 million and $730 million, which would represent annual growth of between 48% and 49%.

Even with solid financial results, Shockwave appears to have joined the growing number of companies seeing share-price declines after failing to boost future guidance substantially. That suggests that investor expectations are getting tougher to meet, and that could pose a problem, not just for Shockwave but for many companies with long-term growth prospects.

Melco stock wasn't a winner today

Shares of Melco Resorts were also down sharply, falling 15% on Tuesday. The casino resort operator reported third-quarter financial results that showed a significant recovery in the key Asian gambling capital of Macao, but still didn't give a rosy-enough picture of the future to satisfy shareholders.

Melco reported operating revenue of $1.02 billion, more than quadruple the $242 million that the casino operator brought in during the third quarter of 2022. That was a period during which COVID-19-related travel restrictions remained in place in the region. However, even with the rebound in revenue, Melco still lost money, posting losses of $16.3 million, or $0.04 per share.

Although conditions in Macao and the company's City of Dreams Manila resort in the Philippines remained strong, the recently opened City of Dreams Mediterranean in Cyprus saw business suffer as a result of geopolitical conflict in the Middle East. In addition, win rates were markedly lower than they were a year ago, with Melco saying that the results from key Macao casinos were below mathematical expectations for the house advantage after having been above the usual range 12 months earlier.

At this point, high interest rates pose a threat to Melco, given extensive debt levels on its balance sheet. Without a successful refinancing, Melco will need to see its business pick up substantially to stay ahead of rising rates.