3 Stocks Looking to Bounce Back
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The looming fiscal cliff has brought in all sorts of possibilities for investors. Naturally, the fiscal cliff is worrisome, but it is definitely something that will be resolved. However, it has caused some names in the stock market to decline, quite steeply in some cases. This could be a good time for investors to pick up shares in companies that have seen such a slide. So let’s take a look at three companies that will bounce back, and why they will do so.
Crocs (NASDAQ: CROX)
Crocs is the maker of the eponymous iconic shoe brand. Shares of the footwear retailer are currently trading close to a 52-week low. Shares fell more than 21% after the quarter's results were announced, and guidance was a little light. Crocs posted a net income of $45.1 million, or $0.49 per share, compared to analysts' estimates of $0.43 per share. Total revenue rose 7.5% to $295.6 million, while analysts were expecting $302.4 million. Revenues from Europe, which account for a little more than 13% of total revenue, decreased by 2.9% in the previous quarter. Challenging macroeconomic conditions in the European market and a weaker Euro pressured its results, Chief Executive John McCarvel said in a statement. The company forecast revenue of $220 million for the fourth quarter, and said it expects to break even on a per share basis.
Investors looking for a bounce in Crocs point to the fact that estimates have come down tremendously. When estimates come down too much, it increases the chance that the company could surprise. Traditionally, the company has done best in the past when expectations were low. Current estimates call for $219.86 million in revenues and break even earnings. However, as analysts continue to revise their forecasts, expectations could likely come down. The company trades currently for less than 8 times next year’s expected earnings. The company is expected to grow revenues at roughly 12% this year and next, and earnings at about the same pace over that period. Crocs won't be discounting as many products this year, in an attempt to showcase new products, a move that could help improve margins. Bear in mind that the company has done best when most people write it off, and currently most people have written it off.
Baidu (NASDAQ: BIDU)
The Chinese internet giant hit a 52-week low on Friday over concerns that Qihoo's search engine is a legitimate threat to Baidu. Despite all of the negativity, Baidu still maintained 73% market share in October. Also, Baidu is still growing at an exceptionally quick pace. In 2012, the company is forecast to grow revenues nearly 54% and earnings per share 57%. In 2013, the company is expected to grow revenues by another 36% and earnings per share by 27%. With current expectations, Baidu is trading at about 15 times next year’s earnings, which is only a 10% premium to Google. If you take out Motorola from the equation, Google is only growing at about half the pace of Baidu, thanks to the fact that search engines in China are still in their early high-growth phase.
BIDU's significant market share in China, robust growth prospects, and leading capability in generating profit and cash flow should substantiate a premium valuation for the stock. Nevertheless, the current stock valuations at 11.8x forward EV/EBITDA, 16.3x forward P/E, and 0.49 PEG represent a large average valuation discount of 26%.
Apple (NASDAQ: AAPL)
The recent decline in Apple shares has been quite dramatic. Apple has fallen more than 25% from its 52-week high above $705, closing Friday at $527.68. It has been a dramatic fall that has wiped out over $160 billion in market cap and really dragged down the tech sector as a whole. Though Apple has had its share of negative press, the company has bright prospects going into the all-important holiday-shopping season -- and into 2013. The iPhone 5 is a hit, having sold 5 million units during its first weekend. The iPad mini has been well-received by journalists and consumers alike.
Another reason to be fairly optimistic about Apple is the latest iMac, which is scheduled to release by December but was showcased at the October product launch. The added speculation of an Apple-branded television set could also be a major catalyst, says Baird Equity Research William Power. “Though timing and approach remain unclear, this remains a sizeable potential opportunity, and importantly could help reaffirm its innovation edge.”
Apple is still expected to grow revenues by nearly 24% this year (ending next September) and 15% in the following fiscal year. Also, the company trades at just 10.5 times this year's expected earnings, and that's before subtracting out the huge cash position.
ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Baidu, and Crocs. Motley Fool newsletter services recommend Apple and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!