In the world of investing, the ebbs and flows of the market are as unpredictable as a rollercoaster ride. March, while a victorious month for the S&P 500 (SNPINDEX: ^GSPC), showcased this inherent volatility. The broad-market index surged 3.1%, outshining its counterparts – the Dow Jones Industrial Average and the Nasdaq Composite. With an impressive 10.1% gain so far this year, the S&P 500 entered a bullish realm in January, marking its best first-quarter performance since 2019.
But, in the midst of growth, there exists decline. Not every stock in the S&P 500 basked in the glory of March. It’s time to delve into the three underperforming stocks of the month to unearth potential opportunities for bargain hunting.
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1. Lululemon Athletica (down 16.3%)
Amidst the chaos of March, retailers faced a tumultuous period, with Lululemon Athletica (NASDAQ: LULU) taking a significant hit. Lululemon claimed the crown for the poorest performer, plummeting 15.8% following its fourth-quarter earnings report on March 22.
While Lululemon showcased robust results with a 16% revenue increase year over year and a 20% rise in adjusted earnings per share, its forecast for 2024 failed to meet expectations. The divergence in revenue growth prediction and analyst estimates sowed doubt among investors. However, the sell-off, more a reflection of perceived overvaluation than operational weaknesses, presents an enticing buying opportunity for astute investors.
2. Southwest Airlines (down 14.9%)
Contrary to common belief, Southwest Airlines (NYSE: LUV) was not a victim of poor earnings in March. The airline’s downward spiral was instead prompted by a retuned guidance, attributing it to the Boeing quality control crisis.
Boeing’s reduction in expected aircraft deliveries to Southwest substantially impacted Southwest’s growth prospects. The ensuing uncertainty injected caution into the investor community, warranting a wait-and-watch approach before diving into Southwest Airlines stock.
3. Zoetis (down 14.7%)
Meanwhile, the pet pharmaceutical domain leader, Zoetis (NYSE: ZTS), grappled with a sales slump, unconnected to any singular event, alongside a broader downturn in pet-related stocks.
Zoetis’ setback in the fourth-quarter earnings release, coupled with a pessimistic outlook for 2024, underscores the persisting challenges post the pandemic in the pet industry. The looming European antitrust scrutiny further clouds Zoetis’ prospects, painting a picture of continued struggle. Despite the drop, Zoetis’ lofty price-to-earnings ratio and industry headwinds advocate for a cautious stance, awaiting signs of industry revival before contemplating an investment.
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Jeremy Bowman has positions in Nike. The Motley Fool has positions in and recommends Lululemon Athletica, Nike, and Zoetis. The Motley Fool recommends Foot Locker, On Holding, and Southwest Airlines and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
