In this article, we’re going to talk about the 10 worst performing NASDAQ stocks in 2024.
Factors Driving Market Growth
Markets have been soaring for the better part of the year, with pullbacks acting as entry levels from where investors have joined and pushed the market higher. While artificial intelligence was one of the factors that drove many tech stocks higher, earnings results that were better than expected also had a significant impact.
Similarly, a resilient US economy that has stayed clear of recession amid high interest rates and inflation has also supported the upward momentum. With the NASDAQ and other major indices at all-time highs, investors are becoming increasingly concerned whether the strong upward momentum is sustainable.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
Challenges and Investor Concerns
Valuations appearing overstretched after one of the longest bull runs are one factor that is sending jitters among the investment community. Similarly, concerns over the negative impact of high interest rates and uncertainty over the US election are slowly curtailing the upward momentum.
Bryn Talkington, managing partner of Requisite Capital Management, believes markets will remain choppy heading into year-end owing to the uncertainty around the US election.
“Until the election is over and we can confirm gridlock, I think at the headline number we’re not going to do much, but I think underneath the surface we’re going to see the haves and have nots,” she said.
Nevertheless, it is the impact of the soaring geopolitical tensions in the Middle East that threatens to affect supply lines that are keeping the markets on edge. The prospects of energy prices surging and fueling inflation on Israel attacking Iran is also taking a significant toll on investor’s sentiments on equities.
While interest rate cuts were expected to be the catalyst to push the equity markets to record highs, that was not the case, as everything seemed to have already been priced. Paul Christopher, head of investment strategy at Wells Fargo Investment, believes the US Federal Reserve is unlikely to cut aggressively as the better-than-expected jobs report in September and renewed worries of a spike in inflation act as a deterrent.
“Just really not ready to cut quite as aggressively as the markets had previously priced. I think if you take November from a half a point down to a quarter point hike, that’s not really a big deal, but it does require some adjustment in markets. There may be some adjustments to rate expectations for December and January as well,” he told CNBC’s “Squawk Box Asia” earlier this month.
While the US economy does not show enough deterioration to justify aggressive cuts, there are stocks listed on the NASDAQ that have underperformed, attributed to a number of factors. Top on the list are companies whose core businesses are negatively impacted by high interest rates that tend to affect consumer purchasing power.
Likewise, some of the worst-performing stocks in the NASDAQ have also taken a hit on high inflation. While inflation has started showing signs of edging lower even as the Fed continues to cut rates, some of the worst-performing stocks are showing signs of bottoming out as macroeconomics improves.
The October BofA Global Fund Manager survey indicates that investors are more optimistic than they have been in four years. 74% of investors think the United States will avoid a recession, demonstrating their optimism about the economy.
Likewise, Michael Hartnett, an investment strategist at BofA, said that investor sentiment is rising due to expectations of further rate cuts by the U.S. Federal Reserve and hopes that Beijing will release more stimulus to strengthen its economy.
Source: Pexels
Our Methodology
We utilized a stock screener to find NASDAQ-listed stocks with market caps exceeding $2 billion as of October 16. We then sorted the stocks in descending order based on their year-to-date share price performance. From this dataset, we identified the NASDAQ stocks with the largest YTD share price declines as of October 16. The following stocks are listed in descending order of their share price performance.
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10 Worst Performing NASDAQ Stocks in 2024
10. Ulta Beauty, Inc. (NASDAQ:ULTA)
Year to Date Gain: -22.56%
Number of Hedge Fund Holders: 46
Ulta Beauty, Inc. (NASDAQ:ULTA) is a consumer cyclical investment play that operates as a specialty beauty retailer. The company offers branded and private-label beauty products. Given that the company depends on consumers’ purchasing power to sell its products, it’s been badly hurt by high inflation and high interest rates that have significantly affected consumers’ purchasing ability.
Likewise, the stock is down by about 22.56%, affirming why it is among the worst-performing NASDAQ Stocks in 2024. According to analysts, the US beauty industry is still resilient, with yearly growth rates ranging from 2% to 5%.
However, Ulta Beauty, Inc. (NASDAQ:ULTA) is up against stiff competition, especially from Sephora’s growth through its collaboration with Kohl’s (NYSE:KSS). Concerns have been raised regarding Ulta’s capacity to hold onto its market share due to this competitive pressure and the normalization of post-pandemic beauty demand.
The stock remains under pressure amid concerns that Ulta’s competitive edge may be weakened by market fragmentation brought on by the expansion of beauty product distribution channels. Ulta may find it difficult to hold onto its current market position without turning to more aggressive promotional strategies, which could pressure margins, as consumers have more options for where to buy their beauty products.
Nevertheless, Ulta Beauty, Inc. (NASDAQ:ULTA) is still working on growth strategies in spite of the challenging environment. To provide on-demand delivery from more than 1,350 locations, the company has extended its partnership with DoorDash, which could improve its distribution capabilities and clientele. The company is also committed to launching new brands.
Ulta’s loyalty program has about 44 million members, making it a valuable asset in strengthening its recurring revenue base. Credit card revenue, which has grown to be a significant source of profit for the business, has been primarily driven by this robust loyalty network.
Here is what Diamond Hill Long-Short Fund said about Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q2 2024 investor letter:
“Still-rising valuations have made identifying attractively valued, long ideas increasingly challenging — though we still found a few in Q2 that we believe the market is overlooking amid its increasingly narrow focus on the mega-cap technology stocks dominating the major indices. We established new long positions in VeriSign, Ulta Beauty, Inc. (NASDAQ:ULTA), Sysco Corporation and Lamb Weston Holdings during the quarter.
Ulta is a leading US specialty beauty retailer. As inflation has remained relatively elevated and consumers have found ways to economize and moderate discretionary spending, we believe Ulta is well-positioned to take share given its compelling portfolio of beauty brands across various price points, including its own private-label brand. We believe the current share price fails to account for an attractive outlook for the company and capitalized on a low valuation to initiate a position in Q2.”
9. MongoDB, Inc. (NASDAQ:MDB)
Year to Date Gain: -25.17%
Number of Hedge Fund Holders: 54
MongoDB, Inc. (NASDAQ:MDB) is a technology company that provides a general-purpose database platform. While the stock is down by about 25.17%, it is turning out to be one of the worst-performing NASDAQ stocks in 2024, given that the overall market has been on an uptrend.
A slowdown in revenue growth and management reducing guidance has been a key factor that has triggered a deep stock sell-off. MongoDB, Inc. (NASDAQ:MDB) depends on customers signing up to generate revenues using its general-purpose data platform. Because the company charges based on how much a client uses its platform, this is a significant source of revenue.
The addition of new clients slowed in the first quarter. Consequently, management was forced to lower revenue guidance for fiscal 2025 from at least $1.9 billion to $1.88 billion. The reduction rattled investors as it raised concerns about MongoDB’s growth metrics, resulting in the stock sell-off. This is made worse by MongoDB’s lack of profitability. As they invest their profits in pursuing rapid business growth, tech companies frequently run at a loss for years.
MongoDB, Inc. (NASDAQ:MDB) anticipates a drop in revenue from non-Atlas products in fiscal 2025. Consequently, it has had to redesign its sales incentives to place less emphasis on upfront contracts. As a result of this change, revenue from unused commitments will decrease from $40 million in fiscal 2024 to almost nothing this year.
MongoDB is already looking into the future as it looks to reinvigorate its growth prospects and strengthen its revenue base. Consequently, it is leveraging artificial intelligence to introduce the AI Applications Program, which provides end-to-end AI technology to improve its competitive edge in the market. It has also made significant product advancements.
As of Q2 2024, 54 hedge funds held positions in MongoDB, Inc. (NASDAQ:MDB), with a total stake of $879.62 million.
Fidelity Growth Strategies Fund stated the following regarding MongoDB, Inc. (NASDAQ:MDB) in its Q2 2024 investor letter:
“An underweight in software & services firm MongoDB, Inc. (NASDAQ:MDB) (-30%) was the next-largest contributor to the fund’s result versus the benchmark. The company’s shares fell sharply in May, after it reported disappointing Q1 results and reduced full-year guidance for its cloud storage platform, MongoDB Atlas.”