The stock market can sometimes be tricky, particularly when the movement of stocks and investor opinion seem irrational. Understanding this possibility is as important as making the most of commission free stock trading to maximize your earnings.
The year 2021 has seen some stocks drop in value. In fact, Motley Fool’s Rick Munnariz observes that nearly one-third of the stocks of the US stock market are trading lower this year despite the S&P 500 trading 19% higher! These stocks cover the industries of retail, real estate, media, pet supplies and video streaming. The irony is that, in the current scenario, these industries should be doing well.
Retail Giant Walmart
Walmart’s ($WMT) drop has been the biggest surprise. Though only 0.7% down, retailers are improving their business and their stock value, as a result. However, a retailer of the magnitude of Walmart has not managed to experience similar growth. On the other hand, its arch rival Target’s ($TGT) stock has managed to rocket 37% in 2021. Actually, Target’s business has been rising even more than Walmart’s. The former’s revenue soared 18.5% in 2020.
Not since fiscal 2007 has Walmart been able to report double-digit growth in sales. It is currently experiencing thin margins since it is focusing on improving employee satisfaction by raising their wages. As a result, it is struggling in growth. Still, its earnings have overcome expectations in recent quarters
The Strange Case of Disney Stock
Walmart isn’t the only big name whose stock has sunk. Amusement park and video streaming stock Walt Disney ($DIS) is also among those stocks, being down 2.9% this year. It has been enjoying profits again with its amusement parks while its movies are also successful. The company also expects its four cruise ships to be fully functional by October. All that good news isn’t reflected in its stock though. Ironically, when its revenue was dropping during the height of the pandemic in 2020 from its theatrical distribution, theme parks and cruise ships, the stock grew more than 25%. That was even after its dividend vanished.
Munnariz attributes the growth of the stock last year to the strength of its Disney+ streaming platform that accounted for less than 9% of Disney’s total revenue. It doesn’t add up logically though, and things sometimes happen irrationally in the stock market.
A Real Estate Tech Stock and a Video Streaming Player
Another big fish to see a seeming irrational drop in its stock value is Zillow ($ZG). The company operates in the booming real estate space, and is a leading online marketplace for people looking for new homes as well as those planning to sell them. However, the stock has dropped by over 30% this year. Its monthly unique visitors have also grown to 229 million.
The video streaming industry has another prominent player whose stock is trading lower this year. Roku has been trading 3.1% lower despite the overall increase in hours spent by consumers on video streaming. Roku has also been growing faster than the other players in the industry, with revenue growth more impressive than the previous year for the fifth consecutive year. What worked against the stock was Wells Fargo analyst Steven Cahall’s price downgrade to $350 from $488. Roku did warn of the impact of rising costs and supply chain issues on its bottom line for the forthcoming couple of quarters though.
In circumstances such as these, it is important to stick to your trading strategy, particularly when you have stocks that have significant long-term potential and are industry leaders. You can also make the most of commission free options trading offered by an advanced broker dealer.
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