The market is rolling right now. Many of the major market indices are trading near fresh highs, but there are still quality stocks trading below their high-water marks.
Toast (TOST 3.42%), Chewy (CHWY 2.99%), and Disney (DIS -0.04%) are three stocks that have lost to the market over the past year. They are all trading for less than half of their all-time highs. This means it could be a good time to get in on these well-known companies while they are currently out of favor.
1. Toast
It's easy to see why Toast shares were burnt to a crisp after posting problematic financial guidance in early November. The provider of payment processing and cloud-based software solutions for the restaurant industry warned that gross payment volume per location was trending lower than a year earlier for the holiday quarter.
The stock was already feeling vulnerable in the weeks leading up to its unpopular third-quarter results. Some analysts were pointing to a soft economy and the resumption of student loan payments gnawing away at consumer appetites for restaurant dining as reasons to steer clear of Toast.
The stock would eventually close out the year in the high teens, essentially where it was at the beginning of the year. It fell woefully short of the general market's 24% jump, and the shares have been cut by more than half since going public at $40 in late 2021.
Image source: Getty Images.
Check please? Not so fast. Restaurants continue flocking to the platform that offers a one-stop shop with dozens of essential functions to excel in today's challenging climate. The 99,000 locations on Toast at the end of its latest quarter is a 34% jump over the past year. Annualized recurring run rate is running 40% higher than it was a year ago.
With the economic outlook getting rosier, this isn't the time to bet against a next-tech leader that is giving indie restaurateurs a fighting chance to thrive. Toast is starting to turn the corner on the bottom line, and the runway for double-digit revenue growth is long just on expanding its network.
Toast is a fintech stock with unique advantages in a growing market. Getting it for less than half of its 2021 debutante price is as tasty as it sounds.
2. Chewy
There are things far worse than Toast's flat stock performance in 2023. Shares of Chewy plummeted 36% last year, and the leading online retailer for pet products is stuck moving lower in early 2024.
Growth is slowing at Chewy. The 8% increase it posted in net sales for its latest quarter breaks a streak of double-digit top-line gains dating back to its IPO five years ago. Its guidance was also uninspiring. The 20.3 million customers it's now serving is a slight sequential and year-over-year dip. It's not a good look for an online marketplace to be growing the wrong way.
The stock is in the doghouse, but it doesn't have to stay that way. The pet adoptions that surged early in the pandemic find us with larger numbers of dogs and cats than we had four years ago. They eat more now, and Chewy has a proven e-commerce platform. With international expansion in the works and Chewy turning to high-margin offerings in everything from pet care to sponsored ads, the future is brighter than the stock chart here.
3. Disney
The Mickey Mouse company has been more goofy than Goofy lately. The stock has trailed the market in each of the last three years, and it's now trading for less than half of the all-time high it hit three years ago. However, help could be on the way.
The media giant's streaming business has been a drag on the bottom line, but Disney is confident that Disney+ and the rest of its direct-to-consumer offerings will be profitable before the end of this calendar year. It's had a rough run at the multiplex lately, but at least three releases from well-performing franchises are on the slate in 2024. Its media networks will naturally benefit from the recovery in TV advertising if the economy holds up this year, and the same can be said about its theme parks, which have been resilient in recent years.
Disney is a master of creating tension before delivering a fairy-tale ending. Now it's time to sprinkle some of that pixie dust on the stock itself.
