3 Underperforming Stocks Gearing for a Second Half Comeback


  • The market may be getting a bit expensive, but the following firms have the means to stage a comeback.
  • Lululemon (LULU): The yoga wear firm stretched higher after reporting a “satisfactory” round of first-quarter results.
  • Snowflake (SNOW): Recent big product announcements and an upbeat Analyst Day don’t seem to be exciting investors. 
  • Disney (DIS): Disney’s CEO continues investing in growth drivers while industry headwinds begin to show signs of fading.
underperforming stocks - 3 Underperforming Stocks Gearing for a Second Half Comeback

Source: shutterstock.com/MarTata

As broader markets look to finish the first half of 2024 with a bang and perhaps returns well into the double-digit percentages, questions linger. What could be in store in the latter half? Truly, stocks have become markedly more expensive in recent months.

Still, outstanding quarterly reports, optimism over generative AI’s productivity-boosting capabilities, and higher hopes for lower rates more than warrant recent appreciation for most names.

Further, just because the market is feeling quite good again doesn’t mean every stock has participated in the impressive first-half rally. Some laggards will be destined for sub-par results from here. But others, especially those that have been investing in timely catalysts, may be preparing for a far better second half. They could catch up with the first-half studs.

Therefore, let’s examine three stocks that may be able to surge back from now until year’s end.

Lululemon (LULU)

Lululemon storefront in a mall. People shop inside the store among the clothes. LULU stock.
Source: lentamart / Shutterstock

Lululemon (NASDAQ:LULU) has been quite a disaster to start the year. The company made significant changes in fashion trends such as yoga wear to denim led by some of the most beloved musical stars. Ahead of Wednesday’s first-quarter reveal, LULU had managed to shed 39% of its value year-to-date (YTD). This marks one of the worst sell-offs since late-2021.

After Wednesday’s market close, Lululemon managed to clock in some mild but far better-than-feared results. Also, they toned down guidance for Q2. Though the quarter wasn’t spectacular, investors seem mostly relieved, with LULU stock soaring 10% in the after-hours session.

Perhaps the biggest bright spot was the whopping 78% in sales growth from mainland China, a market that really cherishes Western brands. Though a small slice of the revenue pie, expect China to power Lululemon’s international segment over the next five years as it rises from its downturn.

So, LULU may have the power to bottom out and bounce back, even in the face of increased fickleness in the athleisure fashion scene. It might even stretch higher in the second half as it gains speed ahead of some pretty low expectations.

Snowflake (SNOW)

The Snowflake logo on a company office in Silicon Valley, California. (SNOW stock)
Source: Sundry Photography / Shutterstock.com

AI stocks have been soaring in the first half, but clearly, Snowflake (NYSE:SNOW) investors haven’t yet received the memo. Despite coming off a rather impressive Data Cloud Summit and Analyst Day, the stock is still sinking.

Additionally, the latest round of events and unveilings gave analysts enough material to adjust their financial models to the upside. Specifically, Snowflake’s new AI-enabling tech stands out as underappreciated, perhaps even misunderstood.

So, Snowflake is doubling down on AI with a new slate of tools that will help developers build the next generation of AI applications. Add Snowflake’s Arctic large language model (LLM) into the equation, and it’s clear SNOW stock has a good chance of pulling ahead. Perhaps once investors consider the AI stocks that aren’t named Nvidia (NASDAQ:NVDA), Snowflake could see improvement.

Thus, SNOW stock stands out as long overdue for a sustained bounce after its latest 43% meltdown off 52-week highs. Perhaps the stage could be set for one in the second half.

Disney (DIS)

dis stock the Disney logo in red font on a storefront
Source: David Tran Photo / Shutterstock.com

Despite recent choppiness, Disney (NYSE:DIS) stock is actually up nearly 12% YTD. But the latest drawdown and loss of Nelson Peltz’s investment dollars could have many hitting the panic button again. However, don’t overreact as the Magic Kingdom heads into summer and the second half of 2024.

Expectations for the entertainment giant still seem quite muted. The stock trades at a modest 18.8 times forward price-to-earnings (P/E). That number isn’t too expensive for a timeless company that seems to have a foundation set for a comeback.

Also, the travel and leisure industry is booming again, which is bound to give Disney’s parks business a massive boost. The company is investing heavily in future growth, with a whopping $17 billion to be invested in its Florida parks.

Additionally, the streaming platform seems well on the path toward achieving profitable growth. With a strong pipeline of films and shows, Disney+ could be a profit engine rather than a money sink over the near future. As parks and streaming catch a break for a change, I find the DIS stock setup quite intriguing as it looks to add to the first half’s solid gains.

On the date of publication, Joey Frenette owned shares of Snowflake and Disney. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

Article printed from InvestorPlace Media, https://investorplace.com/2024/06/3-underperforming-stocks-gearing-for-a-second-half-comeback/.

©2024 InvestorPlace Media, LLC