Currently, several high-profile stocks in the S&P 500 are trading at their 52-week lows. These firms have all had their shares beaten down 15% to 30% in the last three months, but also show signs of a potential rebound.
What caused these firms to experience big drops in their share price? Recent financial results show that all these firms beat adjusted earnings per share estimates. Yet, they saw their share prices drop sharply over the subsequent days.
Let’s explore the reasons for optimism and highlight the case to buy these S&P 500 stocks.
Lululemon Athletica (LULU)
Lululemon Athletica (NASDAQ:LULU) is a consumer discretionary stock that makes high-end athleisure clothing, footwear and accessories. It is trading at a 52-week low of $291.76 as of July 16, 2024.
The company’s shares are down 15% over the last three months and down 25% over the last 12 months. A big contributor to this is the firm’s Q4 of fiscal year of 2023 financial results that it released on March 21st, 2024. Despite beating analyst estimates on adjusted earnings per share by 28 cents, the share price fell around 19% over the three days after its release.
The cause of the stock’s selloff was largely due to a downgrade in guidance the firm provided for the full 2024 fiscal year. The company said it expected adjusted EPS of $14.10 at the midpoint of its guidance. Analysts were forecasting this number to be $14.29. Also, revenue guidance was around $190 million below expectations.
Lululemon is currently trading at its lowest forward price-to-earnings ratio (P/E) of 19.9 in ten years. The average analyst forecast sees an upside of 38% for the shares. This is supported by the fact that in its June financial results, it increased its EPS guidance to a midpoint of $14.37. This is higher than analysts’ original forecast of $14.29, yet the stock price has not recovered.
Nike (NKE)
Nike (NYSE:NKE) is trading at its 52-week low of $72.81 as of July 16, 2024. Its shares are down 23% over the past three months and 34% over the past 12 months. Similar to Lululemon, a poor earnings release is a significant contributor to this decline.
On June 27, 2024, the firm reported its fiscal full-year 2024 financial results. Despite beating adjusted EPS estimates by 17 cents, shares were down 20% on the day of the release. A $220 shortfall in revenue compared to estimates was a large contributor to this.
In addition, Nike cut its 2025 full-year guidance and said it expects sales to decline by 10% in the current quarter. This is far below analysts’ estimates, which expected a decline of 3.2%. This sales drop was partially due to Nike’s attempts to shift more business to its direct-to-consumer channel, aiming to eliminate wholesalers to increase its own margins. Because most of Nike’s sales are made via wholesalers, it makes some sense that the company would experience some transition pain.
The company’s forward P/E ratio sits near its ten-year low at 23.3, and the average analyst forecasts an upside of 31%. If Nike can get through the short-term pain of trying to change its revenue streams, its margins will improve. And that will be a boon to the stock price long-term.
Estée Lauder (EL)
Estée Lauder (NYSE:EL) shares are currently trading at their 52-week low of $100.99 as of July 16, 2024. The firm makes and sells skin care, makeup, fragrance and hair care products. Its shares are down 26% over the past three months and 48% over the past 12 months.
Shares dropped substantially the day after two of its last three earnings releases, by 13% and 19%. The firm handily beat adjusted EPS estimates both times. A large contributor to the share price decline came from the lowering of sales and earnings per share outlook, because difficult conditions in mainland China are expected to continue. The firm received 28% of its net revenues from the country in 2023.
However, the firm’s Chief Executive Officer (CEO) reiterated in its last financial results that they see the second half of 2024 as an “inflection point”. They expect increased growth in organic sales and expanding operating margin. If the worst is behind Estee Lauder, it may get closer to the average analyst price target of $141, implying a 40% upside.
On the date of publication, Leo Miller did not hold (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.
