3 Hot Deals Are Down Over 15% in a Hot Market

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Introduction

Are you feeling the heat in the stock market? 🔥 The S&P 500 may be sizzling with record highs, but savvy investors know that a hot market can still serve up some cool deals. 🧊

Overview

Ready to uncover some hidden gems in the stock market? Despite recent dips, Starbucks (SBUX 1.89%), Nike (NKE 1.71%), and CVS Health (CVS 6.35%) are now trading at irresistible prices. Let’s dive into why 3 stocks have been struggling lately and why they might just be the perfect additions to your portfolio right now.

1. Starbucks

Current Performance

Starbucks has seen its stock price decline by over 15% this year. As of the latest quarterly report, Starbucks has been grappling with several challenges, including rising operational costs and fluctuating consumer spending.

Reasons for Underperformance

• Inflation and Supply Chain Issues

  Like many companies, Starbucks has faced increased costs due to inflation and supply chain disruptions. The company reported a 9% increase in operating expenses year-over-year.

• Changing Consumer Behavior

  The shift towards remote work has altered coffee consumption patterns, with fewer people visiting stores during traditional commuting hours.

Why It Could Be a Good Buy

• Global Expansion

  Starbucks is aggressively expanding in international markets, particularly in China, where it plans to open 600 new stores annually through 2025. This expansion could drive long-term growth.

• Digital Growth

  The company's digital strategy is paying off, with mobile orders now accounting for over 25% of total sales in the U.S. Starbucks Rewards membership also grew by 13% year-over-year, reaching 26.7 million active members. The coffee shop giant suddenly has a crisis on its hands. Sales are dropping and concerns are mounting that customers are trading down to cheaper coffee options. When the company released its latest quarterly results on April 30, it reported that its consolidated net revenue for the first three months of the year was down 2% to $8.6 billion. And globally, comparable-store sales were down by 4%.

  Starbucks' expensive coffee for the most part has been fairly resilient amid inflation and more challenging economic conditions, but there finally appear to be cracks in consumer demand. While the average ticket was up by 2% last quarter, comparable transactions decreased by 6%.

  Shares of Starbucks are down 18% this year. And in May, the stock hit a new 52-week low of $71.80. It has rallied since then but investors can still buy shares of the coffee company at a reduced price. At just 22 times earnings, Starbucks is cheaper than the average stock on the S&P 500, which trades at 23 times its trailing profits.

• Why It’s Steaming Hot for Your Portfolio

  Starbucks is not just about coffee; it’s about the experience. Starbucks’ Q1 fiscal results showed an 8% rise in net revenues. With a dividend yield of nearly 2.89%, it’s like getting paid to wait for the stock to perk up. Plus, with a forward-thinking CEO and a focus on innovation, Starbucks could be the comeback kid of your portfolio.

  Provided you can be patient with the stock, Starbucks has the potential to be an underrated buy as the company still has a strong customer base and while sales aren't great now, this could prove to be a temporary bump in the road for this solid business.

2. NIKE

The Sprint and the Stumble 

Nike, the athletic apparel titan, has also tripped this year, with shares down. Analysts have been cautious, given the stock’s decline of 11%4. Yet, Nike’s third-quarter revenues were slightly up, and its gross margin increased by 150 basis points5.

Why It Could Be a Marathon Winner

Nike’s brand is synonymous with sports excellence. With a PE ratio of 27.956 and a commitment to innovation, Nike is playing the long game. And for investors looking for growth potential, Nike’s restructuring efforts could mean it’s just catching its breath before the next big sprint.

Current Performance

Nike’s recent stock performance has left many investors scratching their heads. A brand synonymous with victory, facing a surprising downturn, is not what we’ve come to expect from the Swoosh. The latest earnings reports have been a mixed bag, with revenue growth showing signs of fatigue in crucial markets. But is it really game over for Nike?

Reasons for Underperformance:

• Supply Chain Woes:

  It’s no secret that the global supply chain has been playing defence against a myriad of challenges. Nike, with significant operations in Southeast Asia, has felt the brunt of this disruption. Factory closures have led to a domino effect of inventory shortages and delayed product launches, leaving Nike scrambling to keep up with demand.

• Currency Headwinds

  The U.S. dollar has been bulking up, and that’s put international sales in a chokehold. Considering that over 60% of Nike’s revenue comes from outside the U.S., the strong dollar has been a formidable opponent, impacting the bottom line.

Why It Could Be a Good Buy

• Strong Brand and Innovation

  Despite the current hurdles, Nike hasn’t lost its edge in innovation. With slam-dunk product lines like the Nike Air Zoom and the Nike Metcon series, the brand continues to dominate the court of public opinion. Nike’s brand equity is like a loyal fanbase; it ensures customer loyalty and gives the company the pricing power of a star athlete.

• Digital Transformation

  Nike’s DTC strategy is on a fast break, with sales sprinting ahead by 16% year-over-year. The focus on e-commerce and crafting personalized consumer experiences is not just a play for the present—it’s a strategy for future championships.

• The Investor’s Playbook

  So, what’s the game plan for the savvy investor? Keep your eyes on the prize. Nike’s current dip could be the strategic entry point you’ve been waiting for. With its robust brand, commitment to innovation, and digital transformation, Nike is poised to make a comeback. And when it does, you’ll want to be on the winning team.

Remember, every seasoned investor knows that sometimes, the best opportunities come from playing the long game. So, lace up, and get ready to make your move with Nike.

3 CVS HEALTH

CVS Health has faced some recent challenges, but it remains a strong player in the healthcare sector. The company's extensive network of pharmacies and its strategic moves into health services and insurance make it a compelling investment. Despite recent downturns, its potential for growth and stability in the healthcare industry offers a great opportunity for investors looking to add a reliable stock to their portfolio.

Current Performance

CVS Health has experienced a more than 15% decline in its stock price this year. Despite the downturn, CVS remains a dominant player in the healthcare sector, with a robust revenue stream.

Reasons for Underperformance

• Regulatory Pressures

  Increased scrutiny and regulatory changes in the healthcare industry have created uncertainty for CVS, impacting investor sentiment.

• Integration Costs

  The acquisition of Aetna has brought about significant integration challenges and costs, which have weighed on profitability.

Why It Could Be a Good Buy

• Healthcare Expansion

  CVS is expanding its healthcare services through its HealthHUBs, which offer a wide range of health and wellness services. The company plans to have 1,500 HealthHUBs by the end of 2021, driving foot traffic and revenue.

• Diversified Business Model

  CVS's diverse business model, which includes pharmacy services, retail stores, and health insurance, provides multiple revenue streams and a hedge against market volatility.

Conclusion

While the broader market continues to soar, these 3 stocks—Starbucks, Nike, and CVS Health—offer attractive entry points for investors looking for value. Each company faces its own set of challenges, but its strong fundamentals and strategic initiatives position them well for a rebound. As always, it's crucial to conduct your research and consider your risk tolerance before making any investment decisions.

Happy investing!

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