3 stocks that are near multi-year lows and could rebound in 2024

By | December 20, 2023

Analyst looking at charts.

When a company underperforms, the markets sometimes tend to overreact. A loss of earnings or a reduction in expectations can sometimes be enough to trigger a significant sell-off, even if the underlying company remains a sound investment.

Heading into 2024, there are three stocks that are struggling this year but have the potential to bounce back. Money tree (NASDAQ: DLTR), Dollar general (NYSE:DG)And Pfizer (NYSE:PFE) are all trading near multi-year lows and could deliver much better performance next year.

1. Dollar Tree

Dollar Tree stock has seen a rally in recent months. But retail stocks are still down 8% year to date and trading around where they were two years ago. The good news for investors, however, is that the rally has the potential to continue into 2024; the stock may have a lot more room to rise.

Dollar Tree doesn’t have a terribly exciting investment to own in 2023, as the company struggles with lower margins due to lost inventory. But with supply chain issues easing and some relief in freight costs expected in the coming years, profitability could improve.

Last quarter ended October 28, the company’s net income was $212 million, down more than 21% from the same period last year. On the bright side, same-store sales are promising, up 5.4% under the Dollar Tree banner and 2% at Family Dollar stores.

Another catalyst that could improve Dollar Tree’s profitability is the continued introduction of higher-priced items, which could lead to a greater variety of products and better margins. This past quarter, the company says it introduced multi-price Plus offers at an additional 870 Dollar Tree locations. As consumers look for ways to tighten their budgets with a possible recession looming next year, Dollar Tree stores could benefit from an increase in traffic.

2. Dollar General

Another discount retailer that may see a recovery in 2024 is Dollar General. The retailer has lost almost half its value this year as it missed estimates and cut its forecasts. The situation became so concerning that the company even brought back its old CEO, Todd Vasos.

Due to the challenging economic conditions, the company is scaling back its expansion. Previously, the company expected to open 1,050 new stores for the 2023 fiscal year (which ends in January), but now it is targeting 990. Limiting expansion is a good move for the company as it can help improve the bottom line.

In Dollar General’s most recent earnings report, for the quarter ending Nov. 3, net income was just $276 million, down 47% year over year. Same-store sales also fell 1.3%.

A turnaround could take some time, but as the company focuses on being more modest about growth and improving its business, this could be a good contrarian stock to hold. Although they have risen in recent weeks, Dollar General shares are still trading around 2019 levels.

3. Pfizer

Pfizer shares have plunged 47% this year. The company faces the loss of patent protection on some of its best drugs later this decade, while revenues from COVID-19 prevention and treatment (via the vaccine Comirnaty and the drug Paxlovid) are also declining. Overall, this does not paint a good picture for investors.

The stock has been in freefall and is approaching a ten-year low. The company expects revenue next year to be fairly similar to what it is generating this year: between $58 billion and $62 billion. While zero growth isn’t impressive, it comes while the company is dealing with significant declines in COVID-19-related revenues. During the first nine months of 2023, Comirnaty’s revenue fell by 77% compared to the same period last year.

The healthcare company has been making acquisitions to strengthen its prospects, and that should pay off in the long run. It recently completed the acquisition of Seagen, which will help expand its oncology business.

Pfizer is in transition, but with its stock trading at a low nine times estimated forward earnings, it’s a cheap buy heading into next year. This is still a strong and diverse company to invest in; With so much negativity and bearishness already factored into the current valuation, the stock has the potential to outperform in 2024.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool has a disclosure policy.

3 Stocks Near Multi-Year Lows That Could Bounce Back in 2024 were originally published by The Motley Fool

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