After months of new highs driven by a white-hot tech market, July was a different story. The S&P 500 gained about 3.5% in the first half of the month -- business as usual for 2024 it seemed -- but went on to lose more than 2.5% from its peak by the time the month closed out.
This sell-off wasn't exactly a sell-off, however. That is, the money wasn't leaving the market so much as being moved to other parts of the market.
Expectations around a shift in monetary policy by the Federal Reserve as well as months of monster gains for a concentrated group of megacap companies led investors to begin shifting focus to mid- and small-cap companies. In fact, while the S&P 500 gained less than 1% and the Nasdaq-100 lost 1.6%, the S&P SmallCap 600 gained nearly 11% in July.
But as hard as it is to see so much red, remember, it could signal an opportunity. Let's take a look at a few of the hardest-hit stocks in the S&P 500. Now might be exactly the right time to scoop some up.
DexCom slashed guidance, and investors slashed its share price
DexCom (NASDAQ: DXCM) makes continuous glucose monitoring (CGM) systems for people living with diabetes. These are life-changing devices for many people and the company's sales have reflected this, pulling in about $3.6 billion in revenue last year.
But its stock fell off a cliff in late July after it released its second-quarter earnings. This is despite beating earnings-per-share (EPS) consensus estimates and posting solid revenue growth of 15% year over year. So why did its stock drop by more than 40% the next day?
It's because DexCom significantly cut its guidance for the third quarter and 2024 as a whole. The company is facing some headwinds that have investors running for the hills. Sales are slowing and the company now expects top-line revenue for the year to hit a maximum of $4.05 billion when it had been projecting $4.35 billion. Major changes in guidance don't tend to instill confidence in a company's leadership. So why is the company seeing this contraction?
First, it's facing increased competition in the CGM space from competitors like Abbot Laboratories and seems to be ceding market share to them. At the same time, the company has been pushing into international markets. For growth to be slowing down when a company is launching into new markets, investors are right to see red flags.
DexCom's leadership insists these issues are transitory. I'm not so sure. I would hold off for now, keep an eye on the next few quarters' earnings, and judge for yourself if these issues are more permanent than the company is letting on.
CrowdStrike's massive slipup could be a massive buying opportunity
In mid-July, a huge snafu grounded flights across the country. It was all due to a faulty update released by CrowdStrike (NASDAQ: CRWD), a cybersecurity company whose software touches systems across the globe. The update caused issues on servers for all kinds of critical organizations including major banks, news organizations, healthcare providers, and Delta Air Lines and other carriers.
This was a bad look for the company. After all, its software is supposed to protect from bad actors taking these systems down from the outside. After the outage, CrowdStrike's share price immediately tanked, down nearly 37% from the day before the news broke. Now, I don't mean to minimize what happened -- this was bad, like possibly the worst outage in IT history bad -- but I don't think this is the time to abandon ship.
How a company responds is often more important than the screw-up itself. So far, CrowdStrike is doing everything it can to remediate the issue. And if anything, the scale of the outage shows the scale of CrowdStrike's business. This is a company with extensive contracts across major industries. If it can navigate the lawsuits it is facing, most notably from Delta, I think CrowdStrike will be stronger for it.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and CrowdStrike. The Motley Fool recommends Delta Air Lines and DexCom. The Motley Fool has a disclosure policy.
