These stocks are down more than 30% from recent highs, but better days could be ahead.
The market hasn’t been kind to some of my favorite stocks. Celsius Holdings (CELH 3.81%), Roku (ROKU 5.59%), and Disney (DIS -0.41%) are trading lower this year — but 2024 isn’t over yet.
I believe that all three can bounce back, beating the market in the final few months of the year. The upside should continue heading into 2025 and beyond.
These growth stocks are out of favor now but certainly not out of flavor. Here is a closer look at why all three names can skyrocket after a sluggish start to this year.
1. Celsius
Growth has decelerated considerably for the functional-beverage specialist, with a product that aims to accelerate the burning of calories and fat if sipped just ahead of cardio activity. I still think Celsius can heat up again. The same company that saw sales more than double for three consecutive years has proven mortal this year — shares have dropped a blistering 62% since peaking in March.
Revenue slowing to a 37% increase through the first three months of this year was rough. The 23% year-over-year uptick the company posted in last week’s second quarter is understandably worse. However, Celsius initially moved higher following its latest financial update. Results actually exceeded the 20% top-line gain that analysts were targeting. The bottom-line beat was even more impressive.
| Quarter | EPS Estimate | EPS Actual | Beat |
|---|---|---|---|
| Q1 2023 | $0.07 | $0.13 | 86% |
| Q2 2023 | $0.09 | $0.17 | 89% |
| Q3 2023 | $0.16 | $0.30 | 88% |
| Q4 2023 | $0.15 | $0.17 | 13% |
| Q1 2024 | $0.27 | $0.19 | 42% |
| Q2 2024 | $0.24 | $0.28 | 17% |
Data source: Yahoo! Finance. EPS = earnings per share.
Profitability has been widening in this scalable business. The 65% surge in earnings per share in its latest quarter is just the latest double-digit percentage beat. The market usually rewards companies that perpetually exceed expectations, but like a Celsius-assisted workout, the stock keeps getting slimmer.
Image source: Getty Images.
The near-term challenges remain. Celsius’ share of the country’s energy drink market has risen to 11% from 9.6% a year earlier, but it’s down sequentially. There isn’t a new rival impeding the company’s functional turf, but after years of monstrous growth by just expanding its reach, it’s clear that the company’s days of triple-digit growth are over.
The stock is trading at a reasonable 30 times next year’s analyst profit target. International sales are still part of the overall revenue mix but outpaced North American growth with a 30% increase. Some have also speculated that the unusually warm summer has shifted consumption to traditional water for hydration.
Autumn and cooler weather are just around the bend. Despite the recent hiccups, Celsius remains one of the fastest-growing beverage stocks. It could be time for another sip.
2. Roku
The streaming-TV pioneer keeps getting better, even as its stock keeps getting worse. Roku shares have been cut in half since hitting a near-term high in December of last year.
Roku is checking all of the right boxes and TV boxes, and its losses are narrowing. It’s stretched its streak of double-digit revenue growth to five quarters, and engagement keeps climbing. The market isn’t impressed, choosing, instead, to channel surf to other growth opportunities.
Despite competing with some of the consumer-tech world’s most valuable companies, Roku continues to be the runaway leader in terms of usage. A springtime Comscore CTV Intelligence study showed Roku’s operating system had a 47% share of the time that U.S. viewers spent on smart TVs.
The Roku Channel — its proprietary offering — has seen its audience soar 75% over the past year. This week, it launched The Roku Sports Channel, which, like its flagship offering, is a free, ad-supported way for its users to check out a wide range of sports programming.
3. Disney
Let’s close with a media company that’s now been around for more than 100 years. Disney may not seem like a growth story, as its revenue gains have failed to top 6% in each of the last five quarters. Even its iconic theme park business has hit a lull. There’s a bigger story happening here with the master storyteller.
Disney announced over the weekend a long list of attractions that will refresh its theme parks in the coming years. Its movie studio is back after putting out the two biggest films of the summer in back-to-back months. Disney+ is finally turning the corner of profitability, and the streaming business is growing its revenue more than enough to offset the gradual decline of its linear media networks.
Analysts are slashing next fiscal-year’s profit estimates in light of Disney’s big investments to spur growth in the future, but that’s the price it has to pay to accelerate growth. It’s a story worth telling, and with a forward earnings multiple in the high teens, it’s an attractively priced tale with a potential fairy-tale ending.
Rick Munarriz has positions in Celsius, Roku, and Walt Disney. The Motley Fool has positions in and recommends Celsius, Roku, and Walt Disney. The Motley Fool has a disclosure policy.
