Is It Time to Buy 3 of the S&P 500’s Worst-Performing Stocks of 2024?

Is It Time to Buy 3 of the S&P 500’s Worst-Performing Stocks of 2024?

THE S&P500 includes some of the best companies in the world. Among the worst performers in the index this year are industry-leading companies that may be undervalued.

Although the index is up 11% year to date, shares of Intel (NASDAQ:INTC), Starbucks (NASDAQ:SBUX)And You’re here (NASDAQ:TSLA) are down 39%, 19% and 29%, respectively. We’ll take a look at why these stocks fell and whether investors should take advantage of the decline.

1.Intel

The growing demand for processors used for artificial intelligence (AI) is generating investor interest in semiconductor companies, but Intel is struggling to keep up with its competitors. The company missed Wall Street’s revenue estimates last quarter, sending the stock down 39% year to date. Even though the shares look cheap, Intel faces an uphill battle against competing data center vendors, which could limit the stock’s upside.

The stock is tempting at these lower prices as Intel remains the dominant supplier of central processing units (CPUs) used in consumer PCs. But the focus on processors is a downside as data centers shift more investment to the most powerful processors. graphics processing units (GPUs) necessary for AI training.

Intel has invested billions to build a U.S.-based manufacturing base and has a long history of producing profits and paying dividends to shareholders. The tech titan has the resources to compete, but it may be trying too hard. It has invested a lot of capital to build its own chip foundry that will make chips for other companies, in addition to networking and software solutions for AI.

These investments blew a hole in Intel’s bottom line. Year-over-year net profit fell to $4 billion over the past year, from $24 billion a few years ago. Moreover, Advanced microsystems has taken significant market share from Intel in consumer PCs and servers in recent years. AMD’s innovation in solid processing performance at competitive prices could make it very difficult for Intel to regain its leadership.

Investors should probably avoid this stock for now. Intel could continue to grow revenue as the semiconductor industry grows in the coming years, but if AMD continues to gain market share, Intel will continue to struggle to deliver meaningful benefits to shareholders.

2. Starbucks

Starbucks is another flagship company that has fallen out of favor. The stock is down 19% year to date and offers investors the best value in years.

Shares of Starbucks fell after the company released an unusually weak earnings report in April. Revenue declined slightly year-over-year in the fiscal second quarter, driven by a 3% decline in same-store sales in North America and an 11% decline in China. Weak sales also weighed on the company’s profits.

Unlike Intel, Starbucks’ problem is not the result of external issues, such as increased competition, but reflects a backdrop of weak retail spending, with other retail companies also reporting weak sales recently .

Starbucks is one of the most important consumer brands. Although it operates more than 38,000 stores worldwide, management believes there is still room for expansion. The downside is that with such a large store base, the company will be vulnerable to an occasional downturn in the economy.

The value of the stock is easily seen in the dividend yield. Starbucks currently pays a quarterly dividend of $0.57 per share, bringing the dividend yield to 2.92%, more than double the S&P 500 average. That’s a good deal for a company that’s expected to continue to increase its profits – and its dividend – in the years to come.

3.Tesla

Tesla shares have fallen 29% so far this year. The electric vehicle (EV) leader’s first-quarter revenue fell 9% year-over-year, which is not the performance investors are accustomed to seeing from this mid-market company. high octane. Tesla experienced some disruptions to its operations during the quarter, including an arson attack at one of its Gigafactories and challenges with production of the updated Model 3. The company also blamed weak demand for electric vehicles in the near term.

Wall Street analysts currently expect Tesla’s revenue to grow just 2% this year. Weaker growth will be a factor limiting the stock’s upside potential this year. However, the stock’s high valuation, with a forward price-to-earnings ratio of 69, implies that investors believe its long-term growth is far from over.

Tesla remains a stock worth owning because it could have millions of cars on the roads in the coming years. The upcoming introduction of the Cybercab robotaxi in August will be a key enabler in this regard. Tesla is playing not only on the continued growth of mainstream electric vehicles, but also on the adoption of autonomous vehicles in the transportation industry.

The advantage for Tesla lies in its growing artificial intelligence capabilities. The electric vehicle maker’s self-driving car software still has a way to go to reach its full potential, but Tesla is making rapid progress to increase the capabilities of its driverless system. The company has already installed 35,000 Nvidia H100 chips for AI training and plans to reach 85,000 by the end of this year.

Tesla is as much an AI software company as it is an electric vehicle maker. It made a significant profit of $13 billion over the past year. This means investors are getting better value for Tesla stock, and that should translate into better returns once the company grows again.

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John Ballard holds positions in Advanced Micro Devices, Nvidia and Tesla. The Motley Fool holds positions and recommends Advanced Micro Devices, Nvidia, Starbucks and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

Is it time to buy 3 of the worst performing stocks in the S&P 500 in 2024? was originally published by The Motley Fool

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