Contrarian investors looking for bargain-buying opportunities on fundamentally strong businesses should check out this list of stocks hit by supply chain issues. Some of the companies covered here could offer high stock investment returns once bottlenecks clear and their value chains normalize in 2022 or later next year.
Persistent international trade tensions, COVID-19 pandemic induced supply chain disruptions and record high freight shipping rates dominated headlines in 2021. However, shortages of manufacturing components, order backlogs, delivery delays and war-time supply chain disruptions have hit some exposed stocks so bad so far in 2022.
A recent Deloitte Report estimates that semiconductor shortages over the past two years could have resulted in revenue misses of more than $500 billion worldwide for suppliers and customers. Losses don’t end there.
Almost all segments of the U.S. economy not entirely service-driven or pure technology faced supply chain issues in 2021, and challenges still persist in 2022.
Here’s my list of seven stocks hit by supply chain issues. Some present very good bargain investment opportunities, while others already show strong recovery momentum.
- Aterian (NASDAQ:ATER)
- Nikola Corp. (NASDAQ:NKLA)
- Roku Inc. (NASDAQ:ROKU)
- Ford Motor (NYSE:F)
- Bed Bath & Beyond (NASDAQ:BBBY)
- Arconic Corp (NYSE:ARNC)
- Epam Systems (NYSE:EPAM)
Let’s have a closer look.
Stocks Hit By Supply Chain Issues: Aterian Inc. (ATER)
Ecommerce growth play Aterian Inc. stock is down 92% over the past twelve months and shares have fallen by 40% in value so far this year.
Record high shipping costs as the supply chain crisis worsened in 2021 dealt a huge blow to ATER’s business and the company defaulted on its debt.
As a value-focused ecommerce giant, Aterian carried voluminous products like kitchen wares and air conditioning systems sourced largely from Asia. The large pieces required high container volumes, yet remain low-margin merchandise. The company couldn’t easily switch suppliers.
Thankfully, Amazon.com (NASDAQ:AMZN) offered logistical help to its merchants. Most noteworthy, the company negotiated better rates on long-term shipping contracts and it managed to convert its huge debt load to equity last year.
Although a full-year 2021 net loss of $234.7 million loss hurt investors, the loss included a non-recurring $139 million loss from extinguishment of debt.
So why would you buy ATER stock today?
Aterian is more liquid and solvent today after closing a $27.5 million private placement of common stock and unlocking a $50 million credit facility this year to strengthen its balance sheet.
The business is still growing with a 33% year-over-year growth to $248 million in 2021 sales. Wall Street analysts expect a 12% sales increase for 2023 to significantly narrow Aterian’s normalized losses next year
I could pay well to buy the dip on ATER stock at this time and hold throughout the turmoil of 2022.
Nikola Corporation (NKLA)
Electrical vehicle start-up Nikola Corporation is working flat-out to convince its stock investors that it can actually deliver functional electrical trucks to commercial customers.
Unfortunately, supply chain issues in 2021 derailed the new CEO’s plans to deliver most of Nikola’s test trucks last year.
The company warned that it would produce fewer than 20% of the electric trucks it expected for 2021 due to pandemic-induced constraints and component shortages in its supply chain.
Nikola produced 30 Tre BEV (battery electric) trucks during the fourth quarter of 2021, it could only commission five of them for customer deliveries due to missing components (including battery components, e-axles, displays or chips).
The company’s situation hadn’t improved by last month as 19 of those same trucks still waited for components or final commissioning by Feb.24. Customers and dealers were still anxiously waiting for them.
Should you buy Nikola stock?
Although Nikola’s operations were significantly negatively impacted by supply chain woes in 2021, its stock price only declined by 35% for the year. NKLA stock has fully recovered from a 30% decline so far this year, up 9% year-to-date at the time of writing.
The low valuation impact of supply chain woes on Nikola stock could stem from the fact that the company is still a pre-revenue EV maker. Supply chain disruptions had no measurable impact on its sales revenues. No customer invoices are being sent out yet.
The valuation of NKLA stock is still more about its potential growth story – which remains relatively unchanged. Shares could still outperform in 2022.
Stocks Hit by Supply Chain Issues: Roku Inc. (ROKU)
Video streaming giant Roku Inc. reported its full-year and fourth-quarter 2021 earnings results on Feb. 17, and its stock price fell 22% the following day.
Roku’s software is embedded in television sets. Supply chain issues in 2021 affected television set production and delivery costs, and Roku’s streaming devices too. This negatively affected the company’s new subscriber acquisition, and fourth-quarter 2021 revenue widely missed market estimates.
Further, supply chain issues in television and streaming device sales were exacerbated by delays to advertising spending in customer verticals heavily hit by supply chain constraints.
Roku stock is down nearly 44% so far this year. Investors still bullish on the growth stock’s performance post today’s short-term supply chain disruptions will be drawn to its relatively cheaper valuation multiples today.
A forward Price-to-Sales multiple of 4.5 is back to levels last seen in January 2019 and has gone below levels seen during a market selloff of March 2020 when investors fled a pandemic-stricken stock market.
Analysts expect revenue growth of 35% year-over-year to $3.74 billion for 2022, but the company may plunge back to losses in 2022 and yet continue generating positive free cash flow for the third year in a roll.
Bed Bath & Beyond (BBBY)
Home furnishing retailer Bed Bath & Beyond had a tough 2021 and its stock closed 73% off its high during the past year. Supply chain woes spooked BBBY stock investors as the company continued to execute a turnaround strategy to regain market share.
The company faced challenges stocking up its 1,000 stores in the USA, Puerto Rico, Canada and Mexico, a challenge that negatively impacted its ability to satisfy customer needs in the run-up to the 2021 festive season.
Bed Bath & Beyond faced higher freight costs, and inventory disruptions impacted its ability to meet customer demand during the holiday season last year. In an earnings call with analysts in January, management estimated that supply chain disruptions cost the company about $100 million in lost sales versus demand during the quarter that ended on Nov. 27, 2021.
That said, BBBY stock has pulled off a strong 50% gain so far in 2022. The current recovery momentum is likely influenced by unexpected gross margin expansions during the last quarter and activist investor Ryan Cohen’s recent influence in reshaping the company’s strategic direction.
Investors should take note that scores of traders still expect the company to fail. The short interest on BBBY stock has reached 59.3% of available float.
Stocks Hit by Supply Chain Issues: Ford Motor Company (F)
Global vehicle manufacturing giant Ford Motor Company (NYSE:F) has been badly hit by a global semiconductor chip shortage that has bedeviled automakers since early 2021.
Reports in February stated that the company could scale back production at its eight vehicle manufacturing plants this year.
Come 2022 Ford is still struggling to secure critical chips and the company is idling several American and European facilities again due to a global chip shortage. Then war broke out in Ukraine.
The Ukraine conflict has caused parts shortages at the Volkswagen plant in Poland. The plant builds Ford’s Torneo Connect.
Ford’s financial results during the first half of the year are usually stronger than during the later half, and investors in F stock are concerned that the company could fail to achieve its $11.5 billion to $12.5 billion earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for 2022.
Ford stock price is down 35% from its earlier highs so far this year. Contrarian investors may take this as an opportunity to buy the dip in Ford stock before it rebounds when chip supplies improve during the second half of this year.
Arconic Corp (ARNC)
Arconic Corporation (NYSE:ARNC) is a global leader in aluminum sheet manufacturing, plate, extrusions and architectural products.
Although supply chain bottlenecks and rising shipping costs negatively impacted its earnings in 2021, they were undoubtedly not as bad as the ongoing Russia-Ukraine conflict.
ARNC stock is down 23% so far this year as the company battles a new class of supply chain issues in 2022.
Arconic operates a manufacturing plant in Russia – the Samara plant, which had more than a fair share of legal and regulatory challenges before the Ukraine conflict. Russian regulatory issues currently prevent any cash and dividend repatriations from the business.
As of December 2021, Arconic had about $79 million, or 24% of its cash and cash equivalents locked up in Russia.
Deteriorating relations between the U.S. and Russia, tariffs and economic sanctions, and import-export restrictions stand to significantly impact Arconic’s operations in 2022.
Most noteworthy, the company generated 19% of its 2021 sales from Russia and Hungary. Some of Hungary’s sales were for products from Russia. The company has since paused any new contracts in Russia.
Stocks Hit by Supply Chain Issues: EPAM Systems Inc. (EPAM)
EPAM Systems’ stock price has declined 54% so far this year. War-time supply chain issues have heavily impacted the digital engineering and consulting company’s value chain and operations since Russian troops entered Ukraine.
The company’s labor supply chain has been severely disrupted. As reported in an Annual Report (Form 10-K) for 2021 filed in February, Ukraine, Belarus and Russia contributed about 53% of EPAM Systems’s labor supply as of Dec. 31, 2021.
More than 21% of its staff were based in Ukraine at the company’s largest distribution center before war broke out.
EPAM is discontinuing its services to customers in Russia and it committed $100 million to support its 14,000 staff complement and their families in Ukraine in March. The company is executing its business continuity plan and actively hiring in other countries.
The financial impact of the war disruptions in 2022 could be significant if the company loses customers due to a seemingly impaired ability to deliver services from the affected locations.
That said, the company is executing a business continuity plan. Revenue from Russia, Belarus, Ukraine, Georgia and Kazakhstan was just 4.5% of total global sales in 2021. The loss of business from Russia could have minimal impact on group sales.
This could be the best time to buy the dip on EPAM stock as it navigates through war-time supply chain disruptions.
On the date of publication, Brian Paradza held a long position in Aterian common stock. He did not hold (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.