The S&P 500 has gained over 17% year-to-date (YTD), and it is turning out to be another great year for investors. However, amidst all the good news, some huge disappointments have surfaced for investors.
These three stocks have been disastrous for their holders. Their value has fallen by double digits, and they show no signs of recovery. With most of the stock market performing so well, investors have no incentive to hold onto them. As a result, the current trend in these selloffs will continue in 2024.
Let’s take a deep dive into why they are struggling and why their prospects are not enticing for investors.
Compass Minerals International, Inc. (CMP)
Compass Minerals International, Inc. (NYSE:CMP) is a major player in the international minerals industry. It mainly supplies plant nutrients, magnesium chloride, and salt, with a focus on North America.
In its second quarter of fiscal year 2024 results, the company reported $364 million in revenue, which was an 11.5% decline compared to the same period last year. Its salt business, which is its biggest source of revenue, experienced a 14% year-over-year (YOY) decline in revenue to $310.4 million.
Amidst the drop in revenue, the company has also seen its capital expenditure increase dramatically. This has reduced its net cash from operations to $22.3 million in the first six months of 2024 compared to $149.5 million the previous year.
Over the past five years, the CMP shares have been on a downward trend, losing over 80% of its value thus far. YTD, the stock has lost almost 60% of its value. Based on its long-term loss in value, CMP stock appears to be headed for another disastrous performance in 2024.
Lululemon Athletica Inc (LULU)
Lululemon Athletica Inc (NASDAQ:LULU) is an athletic wear multinational company based in British Columbia, Canada, but incorporated in Delaware in the U.S. This year, it has lost 41.01% of its value.
In Q1 of 2024, the company reported revenue growth of 10% to $2.2 billion. One of the reasons for the huge collapse in its stock price is its lofty valuation. At the start of the year, LULU stock had a trailing P/E of over 50. Amid the selloff, it has fallen to a more reasonable 23.93.
Despite the recent decline, some analysts feel the stock is still overpriced and expect a further decline in the stock. For instance, Jefferies analyst Randal Konik forecasted that the rise in the popularity of denim could impact Lululemon sales. In the past, Konik has forecast a price of $225 for LULU, well below the current price of $294.04 as of July 8.
Zoom Video Communications, Inc. (ZM)
Zoom Video Communications, Inc (NASDAQ:ZM) is a video conferencing platform that rose to prominence during the pandemic. The company experienced a boom in revenue, but it did not last. As pandemic measures were eased and people returned to offices, the need for ZM was reduced. Instead, plenty of free alternatives are available for most basic video conferencing functions.
Since the end of the pandemic lockdowns globally, the stock has lost nearly 90% of its value from its all-time high of $559, achieved in October 2020. In Q1 of 2025, Zoom reported a revenue increase of only 3.2% YOY, which is not what would be expected of a growth stock. Net income rose significantly to $216.3 million, which is a significant improvement from the same period the previous year.
Despite the huge growth in net income, its current trailing P/E of 21.50 is still too high based on its revenue growth. Another factor that could hurt future growth is the rise of alternative platforms. For instance, Google Meet has recently seen an explosion in popularity. Best of all, it is free and does all the basic functions that Zoom can accomplish. With over 300 million monthly users on Google Meet, Zoom has limited growth potential. Unless it can find a way to increase revenue, net income will also experience a slowdown in the future.
On the date of publication, Joel Lim 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
