2018 was a lackluster year for stocks due to escalating fears about trade wars and rising interest rates. However, investors should think in terms of decades instead of single quarters or years, and realize that businesses with solid fundamentals usually outperform other types of investments over the long term.
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But this doesn't mean investors should assume companies with deteriorating fundamentals will rebound. Let's examine three companies with damaged business models, and why their stocks could struggle to survive in 2019.
Meal kit maker Blue Apron (NYSE:APRN) went public last June at $10 per share. The IPO was poorly timed, since it came shortly after Amazon announced its takeover of Whole Foods and started selling its own meal kits. Meanwhile, other big retailers -- including Walmart and Kroger -- launched meal kits, and aggressive rivals like HelloFresh fragmented the market.
Blue Apron replaced its CEO, laid off a large portion of its workforce, and signed various promotional and distribution partnerships, but none of those moves prevented the company's growth from decelerating. A glimpse at Blue Apron's growth in customers and revenue over the past year explains why the stock now trades around $1.50 per share.
Blue Apron's losses are also widening, and its cash and equivalents dropped 21% in the first half of the year to $180.8 million. Blue Apron's last hope is a buyout, but potential suitors will probably wait for the stock to drop even further, or simply launch in-house meal kits of their own.
Action camera maker GoPro (NASDAQ:GPRO) went public at $24 per share in 2014, and the stock now trades at about $5.50. GoPro enjoyed robust sales of its cameras through the Hero 4, but demand eventually peaked. The market became saturated with cheaper competitors and improved smartphone cameras were good enough for many mainstream consumers.
GoPro tried to widen its moat with drone and VR cameras, but its Karma drone flopped against DJI Innovations' market-leading drones, and its VR rigs and 360-degree Fusion camera remained niche products in a sluggish, over-hyped market. Here's how ugly GoPro's slowdown looked over the past year.
GoPro also remains unprofitable, and analysts don't expect it to return to the black anytime soon. On the bright side, GoPro's gross margin is expanding sequentially on sales of higher-margin cameras, it's cutting costs, and its GoPro Plus subscription service is growing. Unfortunately, GoPro is still a camera maker facing a saturated base of core customers, and it lacks a meaningful moat against the competition.
Snapchat maker Snap (NYSE:SNAP) went public at $17 last June, and the stock now trades around $7. Snapchat remains the top social networking app among U.S. teens, but its daily active users (DAUs) declined sequentially over the past two quarters to 186 million.
Snap continues to grow its average revenue per user (ARPU) with programmatic ads, but relentless competition from Facebook's Instagram lured away some users, and an ill-advised app redesign alienated its core users.
Snap expects that slowdown to continue with 24%-33% growth during the fourth quarter. Snap's losses are narrowing, but its bottom line remains deep in the red, with its net loss of $325 million eclipsing its $298 million in sales last quarter. Snap might pull out of its nosedive if it gets its act together, but a series of high-profile executive departures and an unfocused expansion of its ecosystem raises bright red flags.
This article originally appeared on The Motley Fool.