These stocks looked set to set the world alight, but have surprisingly faltered in recent years, and we want to understand why.
Sept. 21, 2019
There are no guarantees in the stock market over the short term bar one: You will have winners and losers.
While it’s always great to profit from your winning stocks, it is important to learn from your losing stocks, to understand what went wrong, and what can be avoided in the future. With this in mind, let’s look at 3 stocks that had heaps of potential and showed early signs of promise, but then faltered in recent years.
Check out Fighting the Knee-Jerk Reaction: Three Companies That Are Down but Not Out.
The first in our lineup is a company that looked like it was going to take the wearables crown and never relinquish it as it became the name synonymous with fitness trackers. We are of course talking about Fitbit (NYSE: FIT).
Founded in 2007, the wearables manufacturer went public in June 2015 at $20 a share and reached a high two months later at $51. Fitbit sold 3.9 million devices during the first quarter of 2015, an increase of 129.4% over the same period in 2014. This led to great excitement regarding its IPO in an industry where it was relatively unchallenged.
Since then, it has been a long downward trajectory, falling below $4 at the time of writing and hovering below this point for several months previous.
In the past few years, Fitbit has been passed out in the wearables market by the Apple Watch and Xiaomi, and have tried to reclaim the number one spot, but haven’t been successful, despite several initiatives into offered services such as health initiatives. Where Fitbit has failed as a leader in general wearables, it will shift its tactics to focus on dominating the health tracking market. Fitbit offered its watches as part of a health subscription services, in a market trial in Singapore in August 2019.
The main issue here for Fitbit was an overestimation of the market for its product, even if it was the leader. And now, with so much competition, Fitbit has even less market share than before and looks like a company that will need a complete overhaul if it’s to get itself back to the top.
Back in 2016, the global adventure tourism market was valued at $444.9 million and is projected to be worth three times this within seven years. A product that went hand in hand with this new trend was action-camera manufacturer GoPro (NASDAQ: GPRO).
Already a veteran in the industry at this point, GoPro was founded in 2002, and under CEO Nick Woodman, became the leading name in action cameras due to its versatility, ease of shooting, quality of its user interface, and the plethora of available accessories and mounting options. By 2014, this success was evident in its stock price rose from $24 per share to $90 following its IPO that same year which raised almost $500 million and gave the company a $3 billion valuation.
As of the time of writing this article, however, GoPro’s stock price tells a sorry tale, having dropped below $5 per share back in December 2018, and rarely rising above this mark in the past year.
Much of the blame for the failure of this stock in recent years is due to the company’s inactivity in diversifying its brand. Although it was once the leader in action cameras, offering pocket-sized, waterproof lenses for adventures, it never expanded on this and allowed phone manufacturers to catch up, leading to a free-fall in revenue. Despite several promising moves in recent years to expand into the drone and VR markets, none really materialized, with particularly damning failures with the release of a new drone that flopped in the market. The shine was truly rubbed off this one-time Wall Street darling. A company that once commanded a respectable share of the market is now struggling to return to profitability. Not helped by corporate mismanagement throughout the years, especially with erratic CEO Nick Woodman at the helm.
Check out 3 Companies that Show the Awesome Power of Brand.
Probably the most surprising stock on this list, especially as it seems like such a popular brand in the market, is sportswear manufacturer Under Armour (NYSE: UAA). Still a leader in the retail world, the brand has fallen into somewhat of a rut as of late.
The longest public company of the trio, Under Armour went public back in 2005 and went on an incredible run. The company had been growing revenue on average about 27% every year since 2007 and had been profitable for even longer than that.
However, in the latter part of 2016, cracks began to appear in the company’s prospects, as it guided revenue down to $4.925 billion from $5 billion. That was enough to send the stock crashing 11%. This failed target was followed through several more quarters, continually reducing the stock price.
Another massive issue came to light in 2018 when the company was left with over $1.3 billion in leftover merchandise, due to a decline in retail sales in recent years.
A turnaround plan announced in mid-2018 did not yield satisfactory results, with performance remaining stagnated through to 2019. As recently as early September, shares of the company fell further following a poor Q2 earnings report, and it was also announced that it expects sales to decline in North America throughout 2019. This decline is notable among younger ages, as the brand has proven unpopular among demographics of 18-to-34, whereas the likes of Adidas and Nike have increased in popularity.
It is hard to know where Under Armour will go from here, as it appears to be another victim of the ongoing ‘retail apocalypse’ in the U.S.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Fitbit, GoPro and Under Armour. Read our full disclosure policy here.