The market is moving higher this year, but there are still plenty of investments that didn't get the memo. Less than 13% of the market's exchange-listed stocks have lost more than a third of their value in 2024. This is where you can find some good sales if you know what to look for in an out-of-favor opportunity.
Sirius XM Holdings (SIRI +0.00%), Lululemon Athletica (LULU 0.16%), and Roku (ROKU 0.43%) have all fallen by at least 39% this year. They're on sale. Let's go over the reasons why I think these are some of the names in the markdown bin worth taking to the checkout counter.
NASDAQ: SIRI
Key Data Points
1. Sirius XM -- down 51%
Most investors probably haven't given Sirius XM a lot of thought recently. The country's lone play on satellite radio was a battleground stock a decade ago, but now it's just another troubled media stock.
This has been a slow fade for Sirius XM. Organic revenue growth has been in the single digits for nearly a decade, including sliding to a 0.6% decline in 2023. The stock has been cut in half this year, even though it has returned to marginal top-line growth in the last two quarters.
Image source: Getty Images.
Sirius XM continues to entertain 33 million subscribers in the new normal. As a platform that is consumed largely in the car, engagement should pick up this summer as road trips are expected to take a big jump over last year. Folks are also being called back in to in-office work, and satellite radio makes commutes more entertaining with its premium offerings.
This isn't a stock that deserves to be trading at an 11-year low this month. Sirius XM is consistently profitable, trading for just 8 times earnings right now. Adding insult to injury, Sirius XM has 44% fewer shares outstanding than it did the last time it traded this low. Yes, Sirius XM has turned its massive free cash flow over the years into the means to aggressively repurchase its stock. There's also a 4% yield on the shares, rewarding the patient as it tries to return to growth.
2. Lululemon -- down 39%
Slowing growth is also weighing on athleisure brand Lululemon Athletica. The company famous for its luxury yoga apparel is also not growing its sales as quickly as it was in the recent past, but it's still posting the kind of year-over-year gains that would make most clothing companies envious.
Lululemon delivered net revenue growth of 10% for its latest fiscal quarter, up 11% on a constant currency basis. A mere 3% increase in the Americas on flat comps is problematic, but overall growth was lifted to double-digit gains on the heels of a 35% jump in international sales on a 25% surge in comps.
The stock is now trading for 22 times this year's projected earnings. Just like shoppers at a Lululemon store, you don't expect to get something this cheap for a stock that has historically traded at a much higher premium to the market. Lululemon itself seems to think that this is a good time to buy. The board just authorized another $1 billion in buybacks earlier this month.
3. Roku -- down 41%
Some markdowns are just mean. Roku isn't fading as a leader in streaming operating systems. A whopping 81.6 million households continue to cradle the Roku remote, spending an average of what is now more than four hours a day streaming content on their TVs.
Roku has fallen for a couple of reasons. It did more than double last year, so expectations were certainly heightened heading into 2024. It also continues to lose money, even if the deficits have started to narrow. There's also the fear of a new competitor, with the country's leading brick-and-mortar retailer buying a fringe player in Roku's space.
They all seem like short-term concerns. Roku's audience is still growing, up 14% over the past year. After a brief setback, average revenue per user is also starting to inch higher again. If you believe that advertisers and media giants will continue shifting their spending to streaming TV over legacy networks, then it's probably worth considering buying a top dog when it's in the doghouse.
