The first half of 2013 signaled that many significant business turnarounds actually were taking hold. After going back over our list of nine promising turnaround stocks from April, it turns out that many have continued to rise. Here, 24/7 Wall St. evaluates the performance and prospects ahead for five significant turnaround stocks.
The big caveat that must be addressed here is that any turnaround can flop. It seems as though a decade of disappointments can return over and over. That being said, the bull market has helped all of these not just to rise. They have soared, some exponentially.
Best Buy Co. Inc. (NYSE: BBY) has been stellar, and the daily criticism of its past has all but vanished. Shares were around $25 when its turnaround was strongly taking hold back in April. Now the stock is north of $44, and it even hit a 52-week high on Tuesday. No formal takeover came from the founder, which he probably regrets at this point. Now Best Buy is a showroom for buying with price matching rather than a showroom for shoppers to figure out what they want to buy on Amazon or other websites. The notion that online taxes have to be paid in more cases now may be helping as well. Best Buy shares are up about 300% from their lows and by nearly the same amount for 2013. On a valuation basis, the analysts really missed the boat here. Best Buy’s consensus analyst price target is more than $15 lower than the current share price.
Boston Scientific Corp. (NYSE: BSX) is somehow managing to be a breakout stock. It seems almost impossible that the medical device maker’s stock is up close to $12 again. The company’s new management team has managed to convey that they are more focused, and Wall Street perhaps has been more comfortable recently than it has in years. Boston Scientific is up about 110% so far in 2013. Earnings growth has resumed, and Wall Street even expects close to 4% sales growth in 2014 now. Even the stock chart looks like a staircase that has just kept ratcheting higher and higher. We would caution that the Boston Scientific consensus price target is just $12.18.
GameStop Corp. (NYSE: GME) continues to chug along, and the craze over sales of the new PlayStation 4 and Xbox One have yet to happen. This stock was at $31 in April when we reviewed turnarounds, and now it is near $56. That puts the gain at almost 130% so far in 2013. All the freemium tablet and smartphone games have petered out, Grand Theft Auto 5 set a new record and the company delivered on share buybacks. It is hard to imagine that GameStop has recovered this much, yet here we are. Just think of all those many investors who worried about this video game retailer’s future. GameStop’s consensus analyst price target is just over $58.50 going a year out.
Genworth Financial Inc. (NYSE: GNW) continues to see improvement as well. The issues around mortgage insurance exposure seem to be increasingly in the past. Earnings recently tripled, as the mortgage insurance losses were only $3 million in the last quarter. Now the company may lift long-term care premiums to help against investment income coming in short. Genworth shares were around $9.40 back in April, and that was up 130% or so from the prior summer’s lows. Now Genworth is up around $14.50, as its Bank of America settlement may cost it less than expected in prior quarters. Genworth shares are up more than 90% so far in 2013, and the consensus price target from Wall Street is at almost $16 over the next year.
Rite Aid Corp. (NYSE: RAD) has managed to turn from something that looks and smells bad into Shinola over the past year. This troubled drug store chain’s stock price is now back above $5.00, and it was just outside of the screen criteria in April. What is hard to imagine here is that the company has managed to get back to profitability and the stock has risen some 200% since early April. Rite Aid shares even traded under $1 last December, its key holder is no longer a dominating force and same-store sales are positive again now that drugs and other prescriptions are helping out. If the company can ever get its front-end retail same-store sales consistently up, then there may even be more room to run. We would point out that the consensus analyst price target is lower at $5.01 for the next year.
We would also point out that most turnarounds do not exactly meet the suitability criteria for widows and orphans, and that is perhaps even being kind. Caveat emptor!