Zombies
These stocks were written off as dead. Now, their share prices are alive and kicking.
There’s nothing quite as inspiring as a good comeback story. It’s hard to imagine that Apple ($AAPL) was once a downtrodden stock, but it closed 1996 at a low of $0.16 after losing 35% that year. It also reported a US$816m loss and was on the brink of bankruptcy. Cue the return of Steve Jobs, which famously turned things around in a big way. Today the tech giant trades at US$218.80.
There are more recent examples of stocks that tumbled off the charts and struggled to stay relevant. Take Novavax Inc ($NVAX), the biotech that saw its stock price rally 3,000% after announcing plans for a COVID vaccine, only to give up those gains almost entirely when those plans didn’t live up to expectations. The stock dropped from an all-time high of US$319 in 2021 to around US$4 earlier this year. But then a new US$1.2b deal with Sanofi has sparked investor confidence, and sent its stock price up 180% over the last six months.
Then there’s Carvana Co ($CVNA), an automotive stock that has kicked back into gear with a 200% rally since February. It too shot to fame during the pandemic, when there was high demand for buying used cars online. After a brush with bankruptcy in 2022, Carvana turned to cost-cutting measures and got rid of its dangerously high levels of debt. It was that US$878m gain that pushed its net income to US$150m. Whether or not this recent rally runs out of steam will largely depend on what goes on under the hood (especially when it comes to interest expenses).
Championing the ‘less is more’ narrative is 3M ($MMM), as it starts to see the benefits of restructuring and a lean manufacturing operation. After an uneventful couple of years, the stock shocked Wall Street a couple of weeks ago with its biggest ever single-day jump after Q2 earnings. Its 116% YoY improvement in net profit margins and revised earnings guidance (from US$7 to US$7.30) are also worth a shoutout. In a market so focused on tech, it’s a rare bounce for a company that’s been NYSE.-listed since 1946.
If this makes you hopeful about any flatliners in your portfolio, keep in mind that share price resurrections are few and far between. A thorough examination might help to differentiate a company facing a temporary setback with strong long-term potential, from one that has no real prospect of recovery.
