This year looks set to end with a bang, and plenty of stocks will finish as big winners. Led by big tech stocks known as the "Magnificent Seven," the S&P 500 is now up 23% for the year, while the Nasdaq Composite gained an incredible 42%. However, not every stock has surged this year. Let's take a look at three stocks that look set up for a recovery: Walt Disney (DIS +2.30%), Lyft (LYFT +1.56%), and Calavo Growers (CVGW +2.02%).
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1. Disney: Ready to return to building
A little more than a year ago, Bob Iger came out of retirement to replace Bob Chapek as CEO, the man who took over from Iger in 2020. Disney was in disarray, with its linear TV business stalling and losses piling up at its streaming business to the tune of more than $1 billion a quarter.
This year, Iger has been focused on cutting costs and reorganizing the company to put storytelling back at the center of the business and return to growth. It's been a tough year for the entertainment giant, and Iger has admitted more than once that repairing the business has been more difficult than expected.
However, Disney now looks ready to turn the corner after another rough year. The company recently reinstituted its dividend after pausing it during the pandemic, and Iger said the company was done fixing itself and ready to get back to building.
NYSE: DIS
Key Data Points
Indeed, the direct-to-consumer segment improved significantly and is on track to turn a profit by the end of the current fiscal year. Recent price hikes on Disney+ and the addition of the ad tier should help it move in that direction.
Additionally, the company aims to launch a streaming version of its flagship ESPN channel as soon as 2025, and its theme parks business remains a cash cow, which the company said it would double capital expenditures on, adding new worlds for fans of titles such as Frozen. The possibility is also there for asset sales that could help fund growth projects and pay down debt.
Just weeks ago, Disney stock was at a nine-year low, but the business is much larger than it was nine years ago. If management can show it's on a steady track back toward growth, the stock should be rewarded with a higher multiple.
2. Lyft: Profitability is in sight
Lyft (LYFT +1.56%) was a market laggard for much of the year, but the stock has soared in recent weeks, and more gains could be in store for 2024. Shares of rival Uber Techologies have taken off this year as the ride-sharing leader has delivered growing profits, solid growth, and gained admission to the S&P 500.
Lyft could be poised to follow in the footsteps of its larger rival, as the company has taken solid steps toward profitability based on generally accepted accounting principles (GAAP). In fact, it has reported an adjusted profit every quarter this year, and its GAAP loss was just $12.1 million in the third quarter.
NASDAQ: LYFT
Key Data Points
In addition to aggressive layoffs and cost cuts to drive profitability, the company is also making smart moves that should help it grow the top line. Following in Uber's footsteps, Lyft launched in-app advertising, a smart way to monetize its digital real estate, and it introduced a new service called Women+ Connect, which enables women riders and drivers to request and prioritize matches with other women.
Lyft's growth has moderated over the years, but bookings and revenue were up 15% and 10%, respectively, in the third quarter, enough to expand margins. In addition, as a marketplace-based business, it should get more profitable as it scales.
Finally, the stock looks modestly valued at a forward P/E of 28 based on adjusted earnings. If its recovery continues, Lyft could soar next year.
3. Calavo Growers: Avocado prices are up, and savvy leadership is back
For much of its history, Calavo Growers (CVGW +2.02%), one of the world's largest producers of avocados, was a market-crushing stock. However, in recent years, the stock has pulled back, losing that premium as costs have ballooned and it's struggled with volatile avocado prices.
However, two main catalysts are already starting to drive a recovery in the stock. First, avocado prices have bounced off of lows in recent months, though they typically decline in the winter due to the growing season. That price recovery should help reverse a sharp decline in revenue, which fell 24% in the third quarter, ended in July.
NASDAQ: CVGW
Key Data Points
The other reason to bet on a recovery at Calavo is the return of longtime CEO Lee Cole, who was brought back in to stabilize the business under its previous CEO. He's already having an impact on the business, as margins have improved considerably, with gross profit in the grown segment up 80% to $21.4 million even as revenue fell 30%.
If prices remain elevated, Cole's efficiency improvements could drive significant profits for Calavo, which could send the stock soaring in 2024.
