When top growth stocks fall sharply in value, it can potentially be a great time to buy. If their fundamentals and growth prospects remain encouraging and the market has simply overreacted to short-term adversity, then the lower prices can open up some enticing opportunities for investors.
However, that doesn’t mean every dip in price is a buying opportunity. In some cases, beaten-down stocks may be heading for even greater declines. It’s always important to consider the context and understand why a stock has been struggling so that you understand the risks.
Three stocks that in the past were hot buys but have fallen significantly this year include ServiceNow (NOW 1.58%), Strategy (MSTR 7.20%), and Oracle (ORCL 0.49%). Here’s a look at what’s weighing them down today, and if they could be worth buying at reduced levels.
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ServiceNow
Shares of ServiceNow have fallen about 36% this year. The stock has been falling due to concerns that artificial intelligence (AI) will hurt its growth prospects. However, the company calls itself “the AI control tower for business reinvention,” as it claims its platform can work with a variety of clouds and models. And by automating processes for organizations, it can add tremendous value for its customers.
The business is doing well, with revenue for the first three months rising by 22% to just under $3.8 billion. The company beat the high end of its guidance across key metrics and even raised its outlook for subscription revenue for the year.
Today’s Change
(-1.58%) $-1.58
Current Price
$98.39
Key Data Points
Market Cap
$103B
Day’s Range
$96.99 – $98.75
52wk Range
$81.24 – $211.48
Volume
399.5K
Avg Vol
29.1M
Gross Margin
76.56%
Part of the reason for the stock’s big decline this year may stem from its high valuation. In the past, it was trading at well over 100 times its earnings. Now, its multiple is a bit lower at around 60. But based on analyst projections, it’s trading at 24 times its future profits and could be an attractive buy.
The stock is down more than 50% from its 52-week high of around $211. At a more reasonable valuation, it may be worth buying, as investors may have overreacted to AI-fueled concerns; the company’s recent results don’t suggest the business is in a dire situation.
Strategy
At around 44%, Strategy’s decline has been much more significant this year. It’s also down more than 80% from its 52-week high of over $457. The company, while technically in the tech sector, rose to prominence for its bullish stance on Bitcoin and prided itself on continuously buying more of the digital currency.
It’s a risky bet that hasn’t paid off. With Bitcoin falling in value and Strategy seeing significant volatility in its earnings due to wild swings in the cryptocurrency’s valuation, investors haven’t had much reason to buy Strategy’s stock of late.
Today’s Change
(-7.20%) $-6.67
Current Price
$86.01
Key Data Points
Market Cap
$32B
Day’s Range
$83.42 – $88.26
52wk Range
$81.81 – $457.22
Volume
962.1K
Avg Vol
20.3M
Gross Margin
68.11%
Although it’s down big, this isn’t a stock I’d consider buying as it may continue to fall lower this year. The business is highly dependent on what happens with Bitcoin, and if you want exposure to that, you may simply be better off buying funds that track the cryptocurrency.
Oracle
Tech giant Oracle is down about 25% this year as it has fallen nearly 60% from its 52-week high of about $346. The company is doing well in terms of growth, projecting that its revenue will expand by 27% to 29% in the current quarter, and that cloud revenue in particular will grow by at least 57%.
The problem with Oracle, however, is that investors are growing concerned about its rising debt load and exposure to OpenAI. In its most recent fiscal year, which ended on May 31, it raised $43 billion through debt. And for the current fiscal year, it projects to raise $40 billion through a combination of debt and equity. As robust as the opportunities in AI may be, investors remain cautious about the heavy spending required.
Today’s Change
(-0.49%) $-0.72
Current Price
$147.04
Key Data Points
Market Cap
$426B
Day’s Range
$144.48 – $149.90
52wk Range
$134.57 – $345.72
Volume
586K
Avg Vol
27.6M
Gross Margin
63.34%
Dividend Yield
1.35%
Trading at 25 times earnings, Oracle isn’t a terribly expensive tech stock to own. But with the company incurring $1.4 billion in interest expense in its most recent quarter, the debt concern is a valid one, and it’s a reason I’d steer clear of it despite its long-term opportunities. Plus, with interest rates potentially rising in the near future, it may soon become an even riskier stock to hold.