Wayfair (W) stock price has remained under pressure in the past few years as concerns about weak consumer spending remain. It was trading at $52.67 on Friday, down by over 41.8% from its highest point in July 2023 and 86% from its all-time high during the pandemic.

Weak consumer spending

Wayfair shares were among the top beneficiaries of the Covid-19 pandemic as more people stayed at home. At the time, surging demand for home furniture and decor pushed its stock to a record high and its market cap to over $35.86 billion.

This trend reversed after the pandemic as demand waned and as inflation jumped to a multi-year high. It also happened as many investors moved from pandemic winners like PayPal, Block, Zoom Video, Moderna, and Novavax. 

As a result, Wayfair has moved from a high-growth company to one that is struggling to achieve single-digit revenue growth. Data shows that its revenue moved from $9.12 billion in 2019 to a peak of $14.1 billlion in 2020.

After that, its revenue dropped to $13.7 billion in 2021 to $12.2 billion and $12 billion in the following two years. Analysts expect that Wayfair’s revenue will slip to $11.8 billion this year and then bounce back to $12.3 billion in 2023.

The company’s key challenge is that consumer spending, especially in the furniture and decor industry has been significantly weak as interest rates have remained high in the past few years. 

With inflation and interest rates high, most people shifted to consumer staples items like food instead of discretionary like furniture. In the last financial results, Niraj Shah, Wayfair’s CEO said:

“Customers remain cautious in their spending on the home, and our credit card data suggests that the category correction now mirrors the magnitude of the peak to trough decline the home furnishing space experienced during the great financial crisis.”

Therefore, there is a likelihood that the company will receive a boost as interest rates start falling and home sales pick up. The challenge, however, is that it will take several rate cuts for rates to move back to where they were before the pandemic.

Wayfair earnings download

The most recent financials showed that Wayfair’s revenue was $3.1 billion, down from $3.17 billion in the same period in 2023. Its half-year revenues dropped from $5.9 billion in 2023 to $5.8 billion.

These results revealed that Wayfair had 22 million customers, a small increase while the number of orders delivered in the second quarter fell to 10 million. The average order value rose to $313 as the company hiked prices because of inflation.

Wayfair is still losing money, which explains why the management decided to lay off 13% of its total workforce earlier this year. Its net loss in the last quarter was $42 million, an improvement from the $46 million it lost in 2023. 

Data by SimilarWeb shows that website to its traffic and applications has dropped recently. Total visits in August stood at 89.5 million, down by almost 6% from the previous month, meaning that the challenges in the industry continued. 

I believe that Wayfair will need to boost its marketing spend to deal with the elevated competition and industry challenges. 

Analysts have mixed opinions about the Wayfair stock. The most recent note was from Argus Research who downgraded the stock from buy to hold. Other analysts from Barclays, JP Morgan, and RBC Capital have an equal-weight, overweight, and sector perform, respectively. The average Wayfair stock price forecast among analysts is $62.87, higher than the current $52.50. 

Wayfair stock price analysis

The weekly chart shows that the Wayfair share price has moved sideways since 2022. It has remained inside the key support level at $29.10 and the resistance level at $91. There are signs that it has struggled to drop below that support point. 

Wayfair is consolidating at the 50-week and 25-week Exponential Moving Averages (EMA). Also, the Average True Range (ATR) has moved upwards, signaling that some investors are slowly accumulating the shares.

Therefore, the stock will likely start to bounce back in the next few months as investors target the next key resistance point at $75, its highest point in May this year. This rebound will likely happen ahead or after its next financial results on November 1.

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Morgan Stanley downgraded ASML Holding NV (NASDAQ: ASML) on September 20 by cutting the stock’s rating from Overweight to Equal-weight.

The firm also revised its price target for ASML to €800 from €925, citing concerns about a potential slowdown in semiconductor capital expenditures and specific risks tied to weak capacity additions at Intel and a softening dynamic random-access memory (DRAM) cycle, expected to impact growth in 2025.

Despite the downgrade, Morgan Stanley acknowledged ASML’s strong earnings history but indicated that the risks around China’s demand and Intel’s challenges in the foundry business may weigh on the stock.

Other analysts are also cautious

The downgrade is part of a larger theme for ASML, as other analysts have expressed caution recently.

UBS, for example, lowered its rating earlier this month, seeing a “transition” year ahead for the company and reducing its price target to €900 from €1,050.

This highlights a growing concern that ASML’s earnings growth, particularly in the DRAM sector, may slow down due to global macroeconomic headwinds and more restrictive chip export policies.

The firm’s strong backlog, largely supported by orders for its advanced EUV lithography machines, is still seen as a long-term strength, but the near-term risks are gaining more attention.

In addition to the downgrade, ASML faces regulatory headwinds, particularly in China, where about half of its system sales are concentrated.

The Dutch government recently expanded export licensing requirements for some of ASML’s most advanced machines, tightening the company’s ability to sell certain models to Chinese clients.

This regulatory environment is expected to further complicate ASML’s outlook, especially as the US pressures its allies, including the Netherlands and Japan, to restrict advanced semiconductor exports to China.

ASML stock: HBM in demand

On the positive side, there is optimism around High Bandwidth Memory (HBM) growth, driven by AI demand.

ASML is expected to benefit from this sector’s resilience, particularly with companies like Taiwan Semiconductor Manufacturing Co. (TSMC) continuing to invest in high-tech nodes such as N2/A16.

Still, these growth areas may not be enough to offset the broader risks posed by China’s uncertainties and Intel’s weaker capacity outlook.

Despite the mixed outlook from analysts, ASML remains fundamentally sound, boasting a gross margin above 50% and an operating margin near 30%.

However, its exposure to cyclical downturns in the semiconductor industry could make it vulnerable, particularly as capital expenditures across the sector show signs of cooling off.

Additionally, ASML’s backlog, which stood at €39 billion in Q2, offers some protection but may not be enough to fully shield it from upcoming challenges.

Headwinds aside, ASML still has substantial tailwinds.

The adoption of its new High NA EUV machines, which are critical for advanced chip manufacturing, continues to gain traction.

Major clients like Intel and Samsung are set to place orders soon, reinforcing the company’s leadership in the semiconductor equipment market.

Additionally, the demand for AI chips and the shift to more advanced semiconductor nodes will likely support ASML’s long-term growth.

ASML stock valuation

The valuation of ASML, with its forward price-to-earnings (P/E) ratio currently hovering around 28x, which, while lower than its peak, remains elevated compared to historical averages.

The stock’s recent pullback has attracted some buyers, but with projected growth of just 13% for 2025-2030, compared to the previous 24% CAGR, some believe the stock may be priced too high for its slowing growth trajectory.

With all these factors at play, the stock’s future direction remains uncertain.

Now, to better understand what lies ahead, let’s turn to the charts and see what the technicals reveal about ASML’s price trajectory.

ASML stock shows a medium-term downtrend

ASML’s stock made its all-time high above $1100 in the first half of July this year but has been in a downtrend ever since the company reported its Q2 earnings on July 17.

Source: TradingView

This downtrend dragged the stock down to the $750 level, which was a previous resistance that has now turned into a support.

Although the stock remains in control of bears in the short to medium term, it offers a low-risk entry to bulls at current levels.

Investors who have a bullish outlook on the stock can initiate a long position near $790 with a stop loss at $748. If bullish momentum returns, we can see the stock near its all-time high again in the coming months.

Traders who are bearish on the stock must wait for it to either bounce back to $880 levels or fall below $755 before initiating fresh short positions.

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Penny stocks could see a revival in 2024 as the Federal Reserve and other central bank starts cutting interest rates. Historically, these companies tend to thrive when there is a risk-on sentiment in the financial market, which is already happening as the fear and greed index has risen to 66. 

Penny stocks often give investors a good way to make some quick returns. However, most of them can be highly risky. For example, as we wrote earlier this year, Bit Brother was becoming a favorite company among penny stock investors. The stock has plunged since then and is no longer all that active.

Traders have also lost substantial money investing in penny stocks like Mullen Automotive, Canoo, Fisker Automotive, and Lordstown Motors. Here are some of the top penny stocks to consider if I had $500 to invest.

Lloyds Bank Group

Lloyds Bank Group is a large banking organisation in the UK, where it offers its financial services to over 26 million customers. In addition to its eponymous brand, it also owns other brands like Halifax, Scottish Widows, Bank of Scotland, MBNA, and Black Horse. 

Unlike most penny stocks, Lloyds is not a small, troubled company. It is a juggernaut with a market cap of over $46 billion. 

Lloyds is listed in the UK, where its stock was trading at 58.26 GBX. It also has ADRs that are traded in the United States, which go for just $3.1, making it a penny stock.

Lloyds’s ADR has done well this year, rising by almost 60% in the last 12 months, helped by higher interest rates in the UK and its focus on boosting shareholder returns.

The RealReal

The RealReal is a company that aims to disrupt the luxury fashion industry. It operates a website and applications that lets people list and sell their designer items like clothes, bags, jewerly, and watches. 

The company has had a rough patch in the past few years as its stock plunged from $30 in  2021 to a low of $0.9824. It has also made substantial losses in the past few years. 

However, looking at its financials shows that its business is improving. Its revenues rose from $130 million in the second quarter of 2023 to over $144.9 million in the last quarter. It also narrowed its quarterly loss from $41 million to $16.7 million This improvement explains why its stock has jumped by over 41% in the last 12 months.

New Gold | NGD

The other penny stock to buy is New Gold, a Canadian company whose stock was trading at $3.05 in the United States. 

It is a gold mining company valued at over $2 billion. Its business is made up the Rainy river and the New Afton copper-gold mine.

New Gold’s stock has surged by over 190% in the last 12 months, helped by the ongoing gold price rally. As a result, its revenue rose from $184 million in the second quarter of 2023 to over $218 million. 

Gold jumped to a record high of $2,558 and this trend may accelerate as the Fed starts cutting interest rates. 

Ocugen | OCGN

Ocugen is another penny stock to consider. It was trading at $1.14 and has soared by over 185% in the last 12 months, giving it a market cap of over $328 million. 

Ocugen is a biopharmaceutical company focused on the eyes, especially the retina. Its primary product, known as OCU400 has now moved to the third phase and analysts expect that it will gain the final approval by the FDA. 

If this happens, it means that the stock will bounce back as hopes of its acquisition rise. The main risk for Ocugen is that it may be forced to raise cash to fund its R&D since it ended the last quarter with less than $16 million in cash.

Read more: Ocugen stock is a good speculative buy but there’s 1 key risk

EVgo | EVGO

EVgo is a company I wrote about this week, as you can find here. It is a penny stock trading at $4 and with a market cap of over $1.12 billion.

There are a few reasons why EVgo is a good contrarian penny stock to buy. First, the number of EVs on American roads is rising. It is estimated that the number has moved from below 100k a decade ago to over 2 million today. While the growth is slowing, the reality is that the industry will always be there.

Second, EVgo’s business is still growing despite the challenges in the EV industry. Its quarterly revenues rose from $50.6 million in Q2’23 to over $66.6 million in the last quarter. 

Third, it has a goal to become profitable in the next few years. Most importantly, its top competitors like Blink Charging and ChargePoint are all struggling, meaning that it will continue gaining market share. 

The other top penny stocks to consider are Tilray Brands, Planet Labs, Clover Health Investment, and The Honest Company.

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Burberry Group (LON: BRBY) share price has been in a strong freefall this year as concerns about its growth prospects continue. It has dropped in the last 14 consecutive months, making it one of the worst-performing names in London. 

BRBY was trading at 597p, its lowest point since August 2010, and over 75% below its all-time high. This crash has brought its market cap to £2.14 billion, triggering its expulsion from the blue-chip FTSE 100 index. 

Why Burberry is falling apart

Burberry stock is imploding for a few reasons. First, this sell-off is happening as some other top luxury goods companies drop. In France, shares of Kering, the parent company of Gucci, have dropped in the last three consecutive months and are hovering at their lowest level since April 2017. They are down by almost 70% from last year’s high.

LVMH, the biggest company in France, also tumbled to a low of 600 euros, its lowest point since October 2022 and 33% below its all-time high. In Switzerland, Richemont’s stock has fallen by 25% from its all-time high.

Hugo Boss is the other lagging luxury group brand as its stock has plunged by 43% from its all-time high.

These companies are struggling with the ongoing soft demand for luxury goods, especially in China, their biggest market.

There are signs that many people in China are being selective about their spending habits now that the housing and stock market are not doing well. In Hong Kong, the Hang Seng index remains 42% below the highest point in 2021. 

The same is happening in Mainland China, where the China A50 has dropped by over 45% in the same period. These indices have been left behind by their Asian and American peers. 

The housing market is also under pressure following the collapse of Evergrande, Country Garden, and other companies. While the government has pledged support, the promised $70 billion is not enough and is coming very late.

Therefore, many wealthy shoppers in China have started to focus on reducing their debts instead of overspending. This explains why Bloomberg has noted weak luxury mall traffic in a place like Hong Kong.

Burberry and other luxury brands have flagged the Chinese risk in their financial statements. In its last financial results, Kering noted that sales in Asia, except in Japan, continued to underperform. 

Burberry financial results

Second, Burberry stock price has imploded because of the last financial results, which have showed that its business continued to deteriorate. 

Its revenues in the third quarter stood at £458 million, down by 22% from the £589 million it made in the same period in 2023. Comparable store sales, one of the most important numbers in retail, came in at minus 21%.

Most of Burberry’s sales slowdown was in the Asia Pacific region where sales dropped by 23%. It was followed by the Americas and EMEIA regions where sales dropped by 23% and 16%, respectively.

Most importantly, Burberry lowered its forward guidance and suspend its dividend to preserve cash. It expects that its wholesale revenue will drop by about 30% this year. It was the third consecutive time that the company slashed its guidance. 

Third, and most importantly, Burberry has had more CEO turnover than other luxury brand companies. Its current CEO, Joshua Schulman replaced Jonathan Akeroyd. 

Akeroyd replaced Marco Gobbetti who was the head for four years between 2017 and 2021. Christopher Bailey was the CEO between 2014 and 2017 while Angela Ahrendts served between 2006 and 2014.  A high turnover of CEOs is often seen as a red flag.

Additionally, there is a sense that Burberry’s positioning in the luxury goods industry has an issue. Unlike Hermes, which caters to the ultra-wealthy, Burberry’s customers tend to be more cost-conscious.

Most importantly, there are signs that Daniel Lee’s designs are not doing well. The company appointed Lee in 2022 and its performance has not improved.

Burberry share price analysis

Fundamentally, there is a likelihood that Burberry will stage a comeback or even get acquired, especially now that interest rates are falling. However, such a comeback will only happen if the company publishes an encouraging financial report. 

On the weekly chart, we see that the BRBY share price has been in a strong freefall in the past few months. It has dropped from a high of 2,458p in April 2023 to below 600p. It formed a death cross pattern as the 50-week and 200-week moving averages crossed each other. 

The MACD has remained below the neutral point while the Relative Strength Index (RSI) has moved below the oversold level. Therefore, the path of the least resistance is still downwards, with the next point to watch being at 500p. 

The alternative scenario is where the stock rebounds and retests the key resistance point at 887p as interest rates start falling. Such a move would mean a 50% rebound from the current level.

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Discount retailers like Dollar Tree (DLTR) and Dollar General (DG) are some of the worst performers in the S&P 500 index this year. DLTR has slumped by 50% in 2024, bringing its market cap to $15.8 billion while DG has slumped by over 36%. 

Specialty retailers are struggling

Other discount companies are not doing well. Big Lots has filed for bankruptcy while Five Below (FIVE) stock has plunged by 55%, valuing it at $5 billion. 

This performance is a harsh reversal for companies that did well a few years ago as soaring inflation pushed people to their stores. 

Most notably, their plunge has also coincided with the sell-off among other specialty retailers. Ulta Beauty, which focuses on beauty products, and which counts Warren Buffett as an investor, has dropped by almost 18% this year.

Specialty pharmaceutical companies are also struggling. Walgreens Boots Alliance (WBA) stock plunged so hard that it was kicked out of the blue-chip Dow Jones Industrial Average while CVS Health has dropped by over 27%. Rite Aid, which used to be the third-biggest player in the industry, has filed for bankruptcy. 

On the other hand, leading retail brands are thriving. Walmart stock has soared to a record high, giving it a market cap of over $600 billion. As a result, three of the Walton family appear among the top 20 of the world’s richest people with a combined net worth of over $300 billion.

Costco stock has also jumped to its highest level on record while BJ’s Wholesale Club has jumped by 21.50% this year, valuing it at over $10 billion. 

This performance means that more shoppers are favoring large brands at the expense of the specialty companies like Dollar Tree and Dollar General.

Dollar General’s weak earnings growth

Dollar General has had a good top-line performance in the past few years as high inflation has pushed more people to discount stores. As a result, its annual sales jumped from over $27 billion in 2020 to over $38 billion last year. 

However, high inflation meant that the company had little room to adjust its prices since it prices most of its products for just a dollar. Also, the company has seen substantial wage inflation as the average wage growth in the US has jumped.

As a result, while its top-line growth jumped, its annual profit slowed from $1.7 billion to $1.6 billion in the same period. 

The most recent results showed that its net sales rose by 4.2% to $10.2 billion while its same-store sales rose by 0.5%. However, its operating profit dropped by 20.6% to $550 million while its forward guidance was weaker than expected. In a statement, the CEO said:

“Despite advancing several of our operational goals and driving positive traffic growth, we are not satisfied with our financial results, including top line results below our expectations for the quarter.”

Dollar Tree’s weak financial results

Like Dollar General, Dollar Tree’s revenues have soared from over $23 billion in 2020 to over $30.5 billion in 2023. Its profitability has also come under pressure, with its net profit moving from $827 million to a $998 million loss last year. Its loss in the trailing twelve months stood at over $1 billion.

Dollar Tree, the parent company of Family Dollar, said that its same-store net sales rose by 1.3% while its consolidated net sales rose by just 0.7% to $7.3 billion. It also reduced its forward guidance for the year, with sales expected to be between $30.6 billion and $30.9 billion.

The most notable statement was that the company was considering strategic alternatives for the struggling Family Dollar business, which it acquired in 2015 for $8.5 billion. With the combined entity now valued at $15 billion, there are concerns that the purchase has not worked out as planned. The CEO also warned about the challenging environment, saying:

“We are encouraged by the continuous progress we are making in the transformation underway at Dollar Tree and Family Dollar, despite immense pressures from a challenging macro environment.”

Outlook for Dollar General and Dollar Tree

The ongoing slump of DLTR and DG stocks has left companies that are trading at a significant discount compared to the market and their peers.

Dollar General trades at a forward price-to-earnings ratio of 14.8 while Dollar Tree have multiples of 13.7. These valuations are significantly lower than the S&P 500 P/E multiple of 21 and Walmart’s 32.

I believe that these companies are going through a cycle, which has been driven by inflation and weak consumer spending. Many consumers have also embraced popular subscription products like Walmart+ and Amazon Prime, which ensure free deliveries.

Therefore, the current volatility and downtrend may continue for a while. However, the stocks will likely bounce back in the long term as the macro climate improves.

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