Even though the overall stock market is very close to its record highs, many stocks have not fared so well. In fact, some stocks have gotten crushed recently.
We asked three of our analysts to give their opinions on stocks that have been beaten down recently, and whether or not there may be some value for investors. Here is what they had to say.
Dan Carroll: Shares of French pharma giant Sanofi (SNY 0.68%) have tumbled by more than 17% after the shocking ouster of CEO Christopher Viehbacher late last month. That's a big concern for this company and its investors going forward, but it's Sanofi's weak 2015 outlook that's the biggest concern for this stock.
Sanofi struggled through the patent cliff last year, but costly patent expiration's are rearing up again: The company's star diabetes treatment, Lantus, is set to lose exclusivity in the U.S. early next year. Sanofi so far has staved off competitors, but pricing pressure's crimping the company's 2015 sales outlook for its diabetes division as well -- a business that makes up more than 20% of the drugmaker's overall revenue.
In its third quarter earnings release, Sanofi projected flat sales of diabetes products next year due partially to price cuts, a big disappointment for the business, which has been a strong growth driver for the company recently, helping revenue grow by more than 5% year over year in the third quarter. If pricing pressures and competition do flatten that growth next year, they'll place even more pressure on Sanofi's pipeline to deliver with developmental drugs such as sarilumab, a rheumatoid arthritis treatment in phase 3 studies with Regeneron (REGN 0.79%) that could earn peak sales of more than $3 billion.
But that makes Sanofi's near-term performance much more of a question mark than investors want to hear -- especially with the unexpected leadership shake-up adding a new problem to overcome. With Sanofi's future murky for now, it's best to stay cautious with this falling stock.
Matt Frankel: Genworth Financial (GNW -0.34%) has just reported its third quarter earnings, and things are much worse with the company's core long-term care insurance business than anyone thought. In the morning following the announcement, shares fell by about 36% to their lowest level since early 2013.
The earnings themselves were bad, missing expectations mainly because of a massive loss produced by the company's long-term care insurance business, the bulk of which was a $531 billion charge taken to bolster LTC reserves.
However, the worst part for investors was the company's announcement that it is going to be a lot more difficult to turn the business around than previously thought, and that it will probably take a lot longer to achieve.
It's tough to say whether or not the company is a buy after the recent plunge. On one hand, there is definitely a lot of need for LTC insurance (70% of baby boomers will need LTC services, but only 10% have any type of coverage). And, Genworth has the leading market share.
However, the company will need to prove to the market that it can be a profitable business, and so far it has disappointed. So, while I think that most of the negative news is priced into the stock now, I'd still stay away until some positive developments are made.
George Budwell: Shares of small cap biopharma VIVUS, (VVUS) have absolutely cratered this year, falling a jaw-dropping 62%. The company's faltering share price reflects the disappointing commercial performance of its FDA approved diet pill Qsymia, and the slower than expected launch of its erectile dysfunction drug Stendra (avanafil). The net result has been a company operating at a steep deficient quarter over quarter.
VIVUS's third-quarter earnings release, though, suggests that this trend may be nearing a reversal. Per the report, the company has been able to cut its operating expenses by 27% compared to a year ago, helping to shrink its net loss per share by a noteworthy 67%. Moreover, VIVUS continues to see a gradual uptick in reimbursement rates for Qsymia, and Stendra is finally starting to generate revenue. If this trend continues, VIVUS could be cash flow positive within the next 15 months.
With a market cap of $353 million, this beaten down biotech is trading at a mere 1.15 times book value, showing the extreme pessimism surrounding both Qsymia and Stendra. A deeper look at the numbers, however, makes me think this stock offers long-term value for patient investors.