Large-cap stocks Intel (INTC), Lululemon (LULU), and Etsy (ETSY) have underperformed significantly in 2024, with each losing a considerable amount of value over the last eight months. So far this year, these companies have lost 33-61% of their value, notably trailing behind the broader market indices.
While such losses might look alarming, they can also present potential buying opportunities for investors with long-term outlooks. With this backdrop, let's explore factors to decide whether it makes sense to buy into these beaten-down stocks at their current price levels.
#1. Etsy
Shares of Etsy (ETSY), an online marketplace, have fallen by more than 33% since the start of the year. This steep decline is mainly due to broader economic challenges, as inflation and other factors have impacted consumers’ willingness to spend on non-essential items. As a result, Etsy has seen a slowdown in its gross merchandise sales (GMS), and its overall growth has taken a hit. Most recently, S&P announced that ETSY stock will be replaced in the benchmark S&P 500 Index ($SPX).
In the second quarter of 2024, Etsy reported a consolidated GMS of $2.9 billion, marking a 2.1% year-over-year decline. While the consistent drop may seem concerning, the company did experience a slight improvement in GMS from the first quarter, showing signs of recovery. Further, Etsy has been actively working on initiatives to spark growth, combining product enhancements with marketing strategies. Additionally, GMS per active buyer — a key measure of consumer activity on the platform — has shown some stability, which is a positive sign.
However, the broader picture remains uncertain. Volatility in consumer spending, particularly on non-essential products like those sold on Etsy, continues to pose a challenge. During its second-quarter earnings call, Etsy's management warned that the challenging economic environment is likely to persist, and they expect GMS to decline by low single digits on a year-over-year basis in the third quarter.
Despite the company's efforts, Etsy’s underlying business fundamentals haven't shown significant improvement, suggesting that macro headwinds and competition are expected to weigh on the company’s performance in the medium term. Given these factors, most analysts have taken a cautious stance on Etsy stock.
ETSY has a consensus rating of “Hold.” However, its average price target of $66.61 indicates a potential upside of around 23.7%.
#2. Lululemon
Lululemon (LULU), known for its high-end athletic apparel and accessories, is under pressure. Its stock has dropped about 50% in 2024, primarily due to weaker performance in the U.S. market. Additionally, product issues and uncertainty in sales projections for 2024 are adding pressure, alongside tough competition, which could impact its near-term performance.
However, looking ahead to 2025, there are reasons for optimism. Lululemon is speeding up the launch of new styles, particularly in performance shorts, tops, and tracksuits. These fresh additions should improve the company's product lineup and attract more customers in the coming months.
Lululemon’s store performance remains strong, with solid sales per square foot. The success of its new stores and the results of its optimization efforts suggest that these factors will continue to drive growth.
While the company has acknowledged the uncertainty surrounding the shorter holiday shopping season and the U.S. election later in 2024, its outlook for 2025 is brighter. The second half of 2024 is expected to see improvements, and the brand is aiming to restore its innovation pipeline to historic levels of product freshness.
Lululemon is also staying committed to its long-term goals. It plans to double its revenue to $12.5 billion by 2026 from $6.25 billion in 2021. Moreover, despite the challenges, the company is ahead of schedule with a compound annual growth rate (CAGR) of 19% over the past three years — above the 15% initially planned.
The company’s new leadership structure, along with its ongoing focus on innovation, is likely to support future growth. Management is optimistic about revitalizing the U.S. women's business while continuing to see strong results in the men's and international markets.
Wall Street remains cautiously optimistic, with a consensus rating of "Moderate Buy" on Lululemon stock. Analysts have an average price target of $318.57, suggesting a potential 25.3% upside from current levels.
#3. Intel
Intel (INTC) stock has lost a staggering 61% of its value so far this year. This sharp decline stems from competitive pressures and loss of market share. Compounding its struggles, Intel has been slow to capitalize on the booming demand for artificial intelligence (AI) technologies, lagging behind its rivals in this fast-growing market.
Looking ahead to the second half of 2024, Intel itself predicts tougher times, with further challenges to its profit margins and competitive positioning. These hurdles raise concerns about the company’s future direction.
Nonetheless, to stabilize its financial position, Intel has introduced cost-cutting measures. While this might help in the short term, doubts remain about whether these initiatives will be enough to reaccelerate growth.
Though the stock’s sharp decline could be seen as a potential buying opportunity, Intel’s ongoing struggles suggest it may be premature to go long on the stock. Analysts have maintained a “Hold” rating on INTC stock, with an average price target of $29.19 — indicating a potential upside of about 51.6%.
The Bottom Line
Despite some efforts toward recovery, all three stocks face challenges ahead, and are likely to remain volatile. However, Lululemon stands out as the most compelling buy for long-term investors. While there is still some uncertainty in the short term, its growth strategy, commitment to innovation, and long-term outlook make it attractive.
Intel offers the highest potential upside, but also carries higher risk due to its competitive struggles. Moreover, Etsy stock might not be a buy now, given its weaker business fundamentals and broader macroeconomic pressures.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
