These 3 stocks are clearly lagging the market this year. But with the end of the bear market, can they see strong…

Today we look at 3 well-known giants that have lost more than 50% this year when looking at stock performance, which in some circumstances could already look tempting from an investment perspective. The article will focus on Shopify, Netflix and Meta, which are in the category of the biggest losers over the past 9 months, which could bring us a bunch of benefits and a sharp bounce after the end of the bear market.

Today we'll be talking about these 3 giants.

Shopify, Netflix and Meta have one thing in common - That is the fact that they are some of the most popular stocks that have risen to absurd levels in recent years, making investors appropriately happy. Today, however, we're going to look at these 3 stocks individually and focus on the reasons for the decline, but more importantly, the catalysts that can lift them back to the forefront, which in other words, could mean that they are currently in a good frame of mind for investment.

1. Shopify $SHOP+0.8%

Shares of $SHOP+0.8% have lost more than 76% this year.

Just a year ago, investors were enjoying a $SHOP+0.8% stock price of around $166. Today, that price is far behind and investors are only interested in one thing - Is Shopify an attractive option at the current price? What do they have to offer?

Why can Shopify be considered an attractive option after this decline? The current headwinds Shopify is facing are partly self-inflicted as they invest in growth and play the long game. However, the company has a comprehensive business model and ecosystem that merchants can leverage to scale and be successful. Additionally, Shopify's leadership is aligned with the best interests of shareholders and employees for success.

Shopify has been one of the darlings of the stock market over the past few years until early 2022. From early 2018 to early 2022, Shopify has been one of the top growth stocks.

Why has $SHOP+0.8% stock fallen so much? It's a simple answer, Shopify overestimated the growth rate of ecommerce post-Covid by hiring too many employees, the war in Ukraine and Russia started, and global inflation was created. Revenue growth slowed in 2022 and macroeconomic inflation forced the company to cut 10% of its workforce.

The second reason for the profit loss was this year, which was a year of investment in expansion and growth for the long term. The company committed to expanding its business model by making the largest acquisition in its history with the purchase of global logistics company Deliverr for $2.1 billion.

Why does the future look better for Shopify? The company has built a platform that solves meaningful problems for entrepreneurs, small businesses and even large corporations. Shopify's success is actually built on the back of the success of their merchants who regularly come back for more, especially because the Shopify platform solves more business problems. Shopify also has an extensive ecosystem that includes some of the biggest commerce players in the market Amazon or Walmart, TikTok, Pinterest, Instagram, Google, eBay, Spotify , Twitter, YouTube, JD.com, Meta.

2. Meta Platforms $META+0.9%

Shares of $META+0.9% have lost just under 57% this year.

$META+0.9% is one of the best positioned companies in terms of numbers, with tens of billions in FCF and a clean balance sheet. In connection with Meta Platforms, I probably don't even need to mention terms like Facebook, Instagram, WhatsApp, AR/VR technology and the metaverse. Of course, this is not the complete package, but the main part that forms the core of Meta Platforms.

Although 2Q22 beat Meta's revenue estimates and missed slightly on operating margins, management's commentary suggests that things may be better in the next few quarters.

Why might $META+0.9% be attractive?

First and foremost is the news:

WhatsApp now allows first-time users to make purchases directly from chat. Meta-owned app is testing the retail potential in India. It would like to bring more such possibilities in the future. In partnership with online supermarket JioMart, WhatsApp allows its users to shop for groceries. Customers in India can start shopping by simply sending a greeting to the online retailer's number. JioMart will then show them the entire range in a catalogue, from which customers choose and add items to their cart. They will also be able to pay for the entire purchase within the app without having to leave WhatsApp.

Instagram Reels is gaining in popularity and isn't that far off from improving monetisation - Reels takes up about 20% of total time spent on Instagram, which I found rather encouraging given that Reels is in its infancy. In the current quarter, that time increased by over 30% on both Instagram and Facebook, meaning that about 26% of total time spent on Instagram was on Reels.

Metaverse - As Mark Zuckerberg has elaborated several times, Meta will be building a platform for the metaverse across multiple sectors over the next decade, including work but also gaming. The focus on developing these platforms is coming because Meta will then have the freedom to develop experiences the way it wants, without any external constraints. As this will be an expensive project that will take a large capital outlay in the coming years, the metaverse project is a work in progress and provides a positive side to Meta as it works to stay ahead of the competition.

Even if Metaverse is taken as a flop at the moment, $META+0.9% is paying cash for its development, is not in debt and should not be penalized because others cannot understand Zuckerberg's vision. One of the reasons I believe META was scrapped is because many investors disagree with $META'+0.9% s play on Metaverse. Whether Metaverse will work or become a major flop is a debate that cannot be had at this point, and we will have to wait and see how the story unfolds.

3. Netflix $NFLX-0.6%

Shares of $NFLX-0.6% have lost just under 60% this year, but that's some improvement as it was down as much as 72% at one point.

The main problem with Netflix, in my opinion, was that more or less covid lockdowns have ended and so people have no reason to spend so much time on their movies and shows. Of course, compared to the past, Netflix has to deal with multiple problems - creating their own original content (it's expensive and often takes time), increasing and strong competition behind their backs, and last but not least some lagging behind in the advertising part. While I'm not of the opinion that a strong Netflix can return to some $680 per share, that doesn't mean they won't maintain their strong position in the future, which is driven by popular content and will now be linked to advertising, where the company has partnered with Microsoft.

What could bring success to Netflix?

Probably improved subscriptions that will include advertising. Netflix expects ad-supported levels to reach up to 40 million viewers worldwide by Q3 2023. Reportedly, Netflix has told ad executives that its preliminary projections predict 4.4 million unique viewers worldwide by the end of the year, while it expects to grow to more than 40 million unique viewers by the third quarter of 2023, with 13.3 million from the U.S.

  • The advertising component will be very important to Netflix's comeback. The competition is getting stronger and they are not afraid to make their subscriptions more expensive, which cannot go unchallenged as their expansion is successful and they gain more and more subscribers.

$NFLX-0.6% has more or less benefited quite a bit from the pandemic crisis. Last quarter, the company also did well amid economic downturns and high inflation, as revenue grew 9% to $7.9 billion and net subscriber losses were only -1 million versus the -2 million predicted. Historically, pay-TV businesses tend to be more resilient across economic cycles. The value proposition of home entertainment is increasing because people are not going out as much.

One concern about $NFLX-0.6% is its slowing subscriber growth. While the U.S. market is already saturated, there are still large unexplored spaces for global expansion. If you believe we're headed toward the inevitable end of the classic cable TV era in the next five or ten years, the growth story of $NFLX-0.6% and its competitors will continue. Even in the U.S., there are still around 72 million households with pay TV, which is a really broad market just there. Globally, then, the number is much larger, and all the streaming giants are aware of that. This is a huge opportunity where this particular streaming giant can succeed.

Conclusion

All 3 stocks are clear losers this year, but that doesn't change the fact that they have projects or unexplored markets ahead of them where they can push their business and boost their growth even further. I'm not saying that this year's slumps are clearly over, but looking at potential stocks that may experience a comeback, these are the 3 companies I wouldn't be afraid to believe.

Please note that this is not financial advice. Every investment must go through a thorough analysis.

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