We recently compiled a list of the 10 worst-performing stocks on the Nasdaq in 2024. In this article, we’ll take a look at how Ulta Beauty, Inc. (NASDAQ:ULTA) stands compared to other worst-performing Nasdaq stocks in 2024.
Factors driving market growth
The market has been soaring for much of this year, with the decline acting as an entry level from where investors came in and pushed the market higher. Artificial intelligence was one of the factors driving many tech stocks higher, but better-than-expected earnings results also had a big impact.
Similarly, the resilient U.S. economy, which avoided recession despite high interest rates and inflation, also supported the upward momentum. As the Nasdaq and other major indexes hit record highs, investors are increasingly concerned about whether their strong upward momentum can be sustained.
Related articles: 10 Most Promising Growth Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
Challenges and investor concerns
Valuations looking inflated after the longest bull market is one of the factors causing anxiety among the investment community. Similarly, concerns about the negative effects of high interest rates and uncertainty about the US election are gradually curtailing upward momentum.
Bryn Talkington, managing partner at Lakequisit Capital Management, expects markets to remain volatile into the end of the year due to uncertainty surrounding the U.S. presidential election.
“Until the election is over and there is a deadlock, there won’t be much on the surface, but underneath the surface there will be a clear picture of the haves and have-nots,” she said.
Nevertheless, keeping the market on edge is the impact of rising geopolitical tensions in the Middle East, which could impact supply lines. The prospect of soaring energy prices and accelerating inflation following Israel’s attack on Iran has also taken a toll on investor sentiment towards stocks.
It was hoped that the rate cut would be the catalyst that would push the stock market to record highs, but that wasn’t the case as everything seemed to have already been priced in. Paul Christopher, head of investment strategy at Wells Fargo Investments, said the U.S. Federal Reserve’s expectations for a better-than-expected September jobs report and renewed concerns about surging inflation are a deterrent. We believe that it is unlikely that the Bank will aggressively lower interest rates.
“We’re not really ready to cut rates as aggressively as the market had previously priced in. If you think about November going from a half-point decline to a quarter-point rise, I don’t think that’s that big of a deal. I think there will have to be some adjustment in the market, and there may be some adjustment in the rate expectations for December and January,” he said on CNBC’s “Squawk Box Asia” earlier this month. Ta.
story continues
While the U.S. economy has not deteriorated enough to warrant aggressive cuts, some stocks listed on the Nasdaq are underperforming due to a variety of factors. At the top of the list are companies whose core businesses have been adversely affected by high interest rates, which tend to affect consumers’ purchasing power.
Similarly, some of Nasdaq’s worst-performing stocks are also affected by high inflation. Inflation is starting to show signs of slowing, even as the Fed continues to cut interest rates, but some of the worst-performing stocks are showing signs of bottoming out as the macro economy improves.
A BofA Global Fund Manager survey conducted in October showed investors are more optimistic than they have been in the past four years. 74% of investors believe the US will avoid a recession, indicating optimism about the economy.
Similarly, Michael Hartnett, investment strategist at BofA, said that expectations for further rate cuts from the U.S. Federal Reserve have boosted investor sentiment, and the Chinese government is likely to take further stimulus measures to strengthen the economy. He said he was looking forward to it.
our methodology
We used a stock screening tool to find Nasdaq-listed stocks with a market capitalization of over $2 billion as of October 16th. We then sorted the stocks in descending order based on year-to-date stock performance. From this dataset, we identified the Nasdaq stocks with the largest year-to-date price declines as of October 16th. The stocks below are listed in descending order of price performance.
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Ulta Beauty, Inc. (NASDAQ:ULTA)
Year-to-date profit: -22.56%
Number of hedge fund holders: 46
Ulta Beauty, Inc. (NASDAQ:ULTA) is a consumer circular investment business that operates as a specialty beauty retailer. The company offers branded and private label beauty products. Given that the company relies on consumer purchasing power to sell its products, it has been hit hard by high inflation and high interest rates, which have a major impact on consumer purchasing power.
Similarly, the stock is down about 22.56%, confirming why it is one of the worst performing stocks on the Nasdaq in 2024. Analysts say the U.S. beauty industry remains resilient, with annual growth rates in the 2% to 5% range.
However, Ulta Beauty, Inc. (NASDAQ:ULTA) faces stiff competition from Sephora’s growth, particularly through its partnership with Kohl’s (NYSE:KSS). This competitive pressure and the normalization of beauty demand post-pandemic have raised concerns about Ulta’s ability to maintain market share.
Shares remain under pressure on concerns that market fragmentation brought about by expanding distribution channels for beauty products will weaken Ulta’s competitiveness. As consumers have more options for where they purchase beauty products, Ulta may find it difficult to maintain its current market position without pivoting to a more aggressive promotional strategy, but… This could put pressure on profits.
Nevertheless, Ulta Beauty, Inc. (NASDAQ:ULTA) remains committed to its growth strategy despite the challenging environment. The company has expanded its partnership with DoorDash to offer on-demand delivery from more than 1,350 locations, which could increase its delivery capabilities and customer base. The company is also focusing on launching new brands.
Ulta’s loyalty program has approximately 44 million members, making it a valuable asset in strengthening our recurring revenue base. Credit card revenue has grown into an important revenue stream for businesses, driven primarily by this powerful loyalty network.
Here’s what the Diamond Hill Long-Short Fund said about Ulta Beauty Inc. (NASDAQ:ULTA) in its Q2 2024 investor letter:
“With valuations still rising, identifying long-term ideas with attractive value is becoming increasingly difficult. However, we still found some ideas in the second quarter; We believe the market has overlooked VeriSign, Ulta Beauty, Inc. (NASDAQ:ULTA) during the quarter with an increasingly narrow focus on mega-cap technology stocks dominating major indexes. , Sysco Corporation and Lamb Weston Holdings. Ulta is a leading specialty beauty retailer in the United States. As inflation remains relatively high and consumers find ways to save on discretionary spending and maintain moderation, Ulta is increasing the appeal of beauty brands across price points, including its own private label brands. Given our strong portfolio, we believe we are in a good position to capture market share. We believe the current stock price fails to explain the company’s attractive outlook and that it took advantage of the low valuation to initiate a position in the second quarter. ”
Overall, ULTA ranks 10th on our list of 2024 Nasdaq’s 10 Worst Performing Stocks. While we acknowledge ULTA’s potential as an investment, our belief is that AI stocks are more likely to deliver higher returns and do so in the short term. time frame. If you’re looking for more promising AI stocks than ULTA, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: 15 humanoid robot stocks to buy, according to Morgan Stanley and Jim Cramer, says NVIDIA has ‘become a wasteland.’
Disclosure: None. This article was originally published on Insider Monkey.
