Betting on a stock when its share price is down is a great way to make long-term gains, but it’s important to make sure that the company has a strong business model and looks likely to rebound eventually.
While the market tends to overreact to bad news, sometimes a stock is down for good reason and investors who buy in will probably be waiting around for a comeback that never materializes.
This is the case for GoPro Inc (NASDAQ:GPRO), Staples, Inc. (NASDAQ:SPLS) and FitBit Inc (NYSE:FIT).
All three are stocks whose moment in the limelight has faded and although management is promising a spectacular turnaround, it’s unlikely to come any time soon.
So without further ado, here are three comeback stories you should probably not count on.
Comeback Stocks to Avoid: GoPro Inc (GRPO)
There was a time when GPRO was big news and investors were climbing over one another to get ahold of the wearable camera maker’s shares. However, GoPro has found itself in a precarious position now that competition is rising and the market has become saturated.
Although GPRO has promised that it still has room to grow, it appears that the camera-maker has painted itself into a corner.
GoPro is struggling with the fact that many of its early adopters are unwilling to upgrade to newer versions and potential new customers are hesitant to spend top dollar for an HD camera that is marginally better than what they could capture with their smartphones.
The company is moving in new directions — adding drones and pushing itself as a software provider — but the fact is that stand-alone cameras are losing traction and GPRO would have to drastically change its offerings in order to generate any significant new growth.
Comeback Stocks to Avoid: Staples, Inc. (SPLS)
Office supplier Staples Inc. is another company whose promise of a comeback feels empty. SPLS stock has been dying a slow death as Amazon.com, Inc. (NASDAQ:AMZN) takes over the retail sector.
However, while clothing retailers have the opportunity to provide customers with shopping experiences that they might be willing to pay a premium for, SPLS can do very little to defend itself against Amazon’s advances.
As there’s really no benefit to visiting a Staples location in person, the office goods retailer can really only compete with Amazon on price, which means lower margins.
SPLS management has said it is working to expand its online offerings, but even if the company builds the best online shopping experience out there, the firm still sells office supplies, like stationary — which are slowly becoming obsolete.
Comeback Stocks to Avoid: FitBit Inc (FIT)
Health and fitness trackers have become all the rage as wearable devices take off, but for long-term investors, FIT stock is a poor choice.
While FitBit has been credited with drumming up interest in fitness trackers in the first place, FIT’s accolades end there. For consumers looking for a dedicated fitness wearable, there are thousands of cheaper options that do the exact same thing.
Sure, FitBit has strong brand recognition as one of the first companies to create a fitness tracker, but then again, so did BlackBerry Ltd (NASDAQ:BBRY) when smartphone market began.
For those who are willing to pay top dollar for a wearable device, there are a host of other devices that do what FitBit does, plus more. Consumers willing to spend are likely to look toward the Apple Watch, which is now waterproof and contains its own GPS signal.
Over the past year, FIT shares have fallen over 50%, but the tech firm probably hasn’t found rock bottom yet.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
