As an investor, you never really know how your investments will play out. Some companies that have been in long-term decline can suddenly become turnaround stocks and rise again, surprising everyone. While most companies that are undertaking a turnaround strategy fail, some manage to get their act together and regain their competitive edge. This isn’t easy and usually takes a long time to accomplish, but it can be done. And when it happens, shareholders are rewarded with big gains.
In the just-completed earnings season for the final quarter of 2023, there were several companies that posted surprise results and gave bullish guidance, sending their share prices sharply higher as a result. Many of these companies had looked down-and-out only a few months ago.
Here are three turnaround stocks to buy that could be due for a major recovery in 2024.
Target (TGT)
Popular retailer Target (NYSE:TGT) looks to have turned a corner. The company just issued fourth quarter 2023 financial results that beat Wall Street’s expectations on the top and bottom lines. Target announced earnings per share (EPS) of $2.98 versus $2.42 that was expected among analysts. Revenue in the final quarter of last year totaled $31.92 billion compared to $31.83 billion that was forecast on Wall Street.
The company’s margins also improved, with its operating income margin rate coming in at 5.8% compared with 3.7% a year earlier. Target said that it grew its profits through better management of its inventory and lower e-commerce fulfillment costs. Going forward, Target plans to implement new sales drivers, including a membership rewards program, to accelerate growth in 2024 and beyond.
Following a big post-earnings jump, TGT stock is now up 18% this year, and appears to have wind in its sails once again. Fans of the trendy one-stop shop will be rooting for TGT to be one of the turnaround stocks of the year, and they may get their wish.
Zoom Video Communications (ZM)
It’s been a long, difficult journey out of the Covid-19 pandemic for Zoom Video Communications (NASDAQ:ZM). But after some difficult cost cutting to help it adapt to slowing demand for its video conferencing services, Zoom Video looks to be turning around its business. ZM stock recently jumped 13% higher in a single day after the company reported earnings that beat Wall Street estimates.
Zoom surprised by reporting EPS of $1.22 compared to $1.15 that was forecast. Revenue in Q4 2023 totaled $1.15 billion versus $1.13 billion that had been anticipated. Sales were up 3% from a year earlier. At the end of last year, Zoom had 220,400 enterprise customers, up from 219,700 at the end of the previous third quarter. The company also provided bullish forward guidance that was better than expected. These kinds of numbers make a strong case for ZM being one of the turnaround stocks of the year.
Year-to-date (YTD), ZM stock is down 2%. But while the days of Zoom reporting revenue growth of more than 100% per quarter are likely gone for good, the the company is growing again, albeit at a slower pace.
Moderna (MRNA)
Could the worst be over for Moderna (NASDAQ:MRNA)? The pharmaceutical company also saw its stock soar during the Covid-19 pandemic as it delivered one of the world’s first vaccines against the respiratory disease. But MRNA stock has since cratered as sales of the Covid-19 shot have fallen steadily over the past 18 months. However, Moderna recently posted a surprise profit for Q4 2023 despite declining Covid-19 vaccine sales.
Moderna announced EPS of 55 cents, which was much better than a loss of 97 cents that was forecast by analysts. The company’s revenue totaled $2.81 billion, which also beat estimates of $2.50 billion. The company overcame the decline in sales volumes by raising the price it charges for its Covid-19 vaccine. Moderna has also undertaken strict cost control measures that have lowered its cost of sales and boosted profitability.
Analysts like that Moderna has 45 new pharmaceutical products in development, including a combined Covid-19 and influenza vaccine that could win regulatory approval in 2025. MRNA stock is down 8.5% YTD.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
