Investors are always on the lookout for stocks that will provide exponential or multi-bagger returns. This means investors need to identify stocks that are undervalued and have significant upside potential. But does the ‘buy low and sell high’ mantra always work? I will look at five tech stocks that are trading at 52-week lows (some are at all-time lows) and are still way too risky.
Fitbit investors have lost 94% since 2015
Fitbit (FIT) has burnt significant investor wealth over the years. The stock is trading at $3.03 per share, 94% below its all-time high price of $48. Fitbit is one of the many tech stocks that was expected to crush market expectations time and again. But the company started losing market share due to increasing competition in the wearable market.
The global wearable market attracted tech giants like Apple (AAPL), Huawei, Xiaomi, and Samsung Electronics (SSNLF). Fitbit tried to launch various products over the years across various price points, but hasn’t been able to regain the top position in the wearable segment.
Fitbit stock has lost over 50% in market value in the last 12 months and is still posting a GAAP loss. The company’s shipment growth is far lower when compared to that of the global market.
GoPro another IPO dud for investors
GoPro (GPRO) is another consumer technology stock that has mirrored Fitbit returns. While Fitbit was publicly listed in June 2015, GoPro’s IPO (initial public offering) was in June 2014. GoPro shares rose from $35.7 in June 2014 to almost $90 in October 2014. The stock is currently trading at $3.96.
GoPro stock fell 38% in 12 months. Though GoPro is popular in the action camera category, the company’s products are priced at a premium and are not a ‘repeat purchase’ product like smartphones. Also, though GoPro tried to introduce products across price points, the company hasn’t managed to increase sales significantly over the years. Further, lower product prices have negatively impacted profit margins.
GoPro stock is again a risky buy and might drop lower if the markets remain choppy.
Investors waiting patiently for Groupon turnaround
Groupon (GRPN) shares are trading at $2.40, which is 48% below a 52-week high. The stock has lost over 90% since the IPO back in 2011. Groupon left international markets three years back to focus primarily on North America.
Analysts expect the company’s sales to fall by 9.6% to $2.38 billion in 2019 and rise by 0.6% to $2.4 billion. The stock is trading at a forward PE multiple of 10.9x. Comparatively, the stock earnings per share are estimated to grow at an annual rate of 5.5%. This indicates that Groupon is still overvalued. Or has Groupon stock bottomed out and is it on the verge of a turnaround? Investors are still waiting for the company to return to revenue growth.
Dropbox stock trading below IPO price
Dropbox (DBX) is perhaps not as risky as other tech stocks in this list. The company is growing revenue at a robust pace. Analysts expect Dropbox sales to rise 18.7% to $1.65 billion in fiscal 2019. In fiscal 2020, analysts expect company sales to increase 14.6% to $1.89 billion. Analysts expect the company to increase earnings at an annual rate of 20.5% in the next five years. The company’s forward PE multiple stands at 31x ,indicating that the Dropbox is still overvalued.
Dropbox stock is trading at $17.76, which is well below its IPO price. The stock lost 24.6% in August 2019 and is down 13% year-to-date. After second quarter results were released earlier this month, the stock fell as investors were unimpressed by the marginal growth in paying subscribers.
Investment bank Bernstein initiated coverage on Dropbox with an “underperform” rating. The bank also has a bearish outlook, which drove the stock lower this month. Dropbox increased its pricing plan for its Plus subscribers that would have led to a tepid growth in paying subscribers in the second quarter.
GameStop stock continues to slide downwards
GameStop (GME) is a retail gaming store that has experienced significant headwinds over the last few years. Due to the transition from physical to digital gaming, the company has experienced a significant decline in revenue. GME investors have lost 90% in market value since October 2015. Company sales are estimated to fall 16.3% to $7.4 billion in fiscal 2020 and 4% to $7.11 billion in fiscal 2021.
GameStop recently announced a company-wide layoff and restructuring plan, which resulted in an uptick in the stock price. However, GameStop headwinds are much more fundamental. The company might lose market value going forward.