It's been a great year for a few companies that found themselves slumping entering 2013. Hewlett-Packard (HPQ +0.67%), Best Buy (BBY 0.11%), and Groupon (GRPN 6.01%) have all posted 2013 gains of at least 80% after having a rough two years prior. Let's take a look at what led to the sudden turnaround of these three companies and see which may have the potential to keep surging.
A tale of two years
Let's start by taking a look at the numbers over the previous years:
|
2011 Starting Price (Jan. 3) |
2013 Starting Price (Jan. 2) |
Current Price (Dec. 10, 2013) |
2011-2012 Loss |
2013 YTD Gain | |
|---|---|---|---|---|---|
|
Hewlett-Packard |
$42.22 |
$14.83 |
$27.04 |
67% |
80% |
|
Best Buy |
$34.10 |
$12.14 |
$41.54 |
66% |
252% |
|
Groupon |
$28.00 (IPO: Nov 4, 2011) |
$4.86 |
$10.04 |
82% |
107% |
Sources: Yahoo! Finance, Google Finance
So, what led to these three companies having such strong years in 2013 after two years of a shrinking stock? Let's go company by company.
New CEO has the company on track
Hewlett-Packard had the worst two years of the bunch, with shrinking sales and a business model that wasn't built to last. Computer sales were sinking and printer ink, where the company centered its revenue in the printing segment, also saw lower sales as consumers responded to the rising ink prices by conserving and shifting to discount retailers.
However, with a CEO switch in late 2011 from Leo Apotheker to Meg Whitman, it wasn't long before the stock took off based on new ideas like potential ink-subscription services and lower ink prices. Increased revenue from other streams -- computer and IT-related sales, to name a few -- added to the recent success of the resurgent company.
Matching prices
Best Buy's problems came as a result of plummeting revenue from the surging online retail era. Consumers began buying electronics online for much lower prices than Best Buy's brick-and-mortar stores could offer. Some customers would even use the giant retailer as a location to test and compare products they were interested in before retreating home to buy them online from retailers like Amazon.com for much lower prices.
To combat online retailers, Best Buy has implemented a price-matching program in which it will match advertised prices that you find online and bring into the store and nearly any product they have in store. This program -- among other approaches such as cost-cutting -- has boosted its stock mightily.
New services for businesses
Groupon, saw its stock drop to less than $5 in slightly more than a year from its IPO price. The business model it boasted throughout most of 2012 featured mainly daily deals that didn't seem to make much sense for the companies involved, and shoppers grew tired.
However, in late 2012, Groupon shifted to working with a small group of merchants to offer new business services such as credit card processing. The plan has been a significant success, as Groupon has profited every quarter in 2013. More importantly, analyst expectations for revenue growth -- a common concern for Groupon in previous years -- have jumped to 14% for next year.
Which of the three companies remain poised for success? Let's take a look.
Still selling many PCs
Hewlett-Packard continues to be the world's largest seller of PCs despite the shrinking market. While it isn't perfect, it has shown under a new CEO that it has been able to adapt and focus on the areas of the company that can bring in revenue. If it can continue to milk the segments that are bringing in the most revenue, including services and business servers, storage, and networking, the company should have a strong outlook for 2014.
Important fourth quarter
Best Buy is a tricky call for 2014. Despite the strong year for this electronics retailer, its fate depends almost entirely on this fourth quarter, where the company earns the biggest percentage of its revenue. It's shaping up to be a very competitive quarter for the industry; most companies that sell electronics, like Target and Wal-Mart, tend to accept that they will bring in a small loss in that department and hope that the consumers they attract through the electronics will also purchase in some of the departments that bring in higher profit margins.
Despite the great stock jump, many analysts believe that Best Buy has failed to adequately back it up, suggesting that the reasoning behind the recent move isn't solid. If Best Buy fails to report strong fourth-quarter numbers, investors may catch on and ditch this stock before it sinks again.
Old dog needs new tricks
Groupon is also no sure bet, despite projected earnings per share for next year sitting 178% higher than this year's projections. Added growth could come from the purchases of rival LivingSocial and TicketMonster, as the company continues to milk its relationship with small businesses. However, some of the same problems that confronted Groupon not too long ago could come back at some point as customers tire of the "same old."
Foolish bottom line
These three companies have relished a surging 2013 after plunging the previous two years. However, not all of them look to have as promising of a 2014. Watch these companies carefully, especially Best Buy, as they post fourth-quarter numbers that will be important for closing out their strong year.
