Revenge of the nerds? Or just revenge of the underperformers? That's a key theme of this quarter's performance and it is most evident in Etsy (ETSY) , the online marketplace, GoPro (GPRO) , the hobbyist personal camera company, Fitbit (FIT) , the health and wellness company that was formerly known as a smart watch company, and Groupon (GRPN) , the shopping website.
All four of these companies have had storied careers as retail darlings which, at various points, crushed their shareholders. To be certain, though, each pummeling wasn't necessarily caused by the companies' actual performance, but by impossibly high bar set by too much over-enthusiasm for the products themselves.
Take Etsy, which reported last night. Here's a company with a stock that traded to $30 at the time of its initial public offering back in April of 2015. The hype? It was supposed to be the next Amazon (AMZN) , this time for handmade crafts. I called it at the time the natural and organic Amazon.
The excitement around this company's stock was totally linked to the love of its site and the quirky nature of the Brooklyn company that seemed as intent on empowering individual merchants -being a good deed doer so to speak-as in turning a profit some day.
So right out of the chute it let people down, even as it was most certainly sacrificing the short-term for the long-term. Guess what? The long-term is here, with Etsy reporting a huge leap in active sellers, 39% revenue growth, 64% adoption of the mobile app -- very important because it was originally perceived as a very clunky site -- and actual profitability if you back out one-time issues and a currency hit.
This company, like the others, had been left for dead -- an afterthought in investors' minds. Now, because of its accelerating growth and worldwide reach, I have to wonder if it isn't one of the more undervalued growth stocks out there, even after its very big run, more than a double from its February lows.
What can I say about GoPro, a company with an exciting suite of products? Its stock went from $24 to $96 in five months, from June until October 2014, peaking ahead of what turned out to be a disastrous year, and a flurry of insider selling. It was a long slog down to $8 last May -- an 80% decline.
This last quarter just reported showed a 20% sequential gain, though, with the key average selling price of devices actually rising 11%. To me that said the long grind of inventory reductions is at last winding down, having been reduced by nearly 35% sequentially. Now it is about to unveil a series of new products that are about to launch that might fulfill the hype of just a few years ago, just when this darned thing looked like it had dropped off the radar screen. It could be a good trade, not a buy-right into the October momentum peak we saw a few years back.
Speaking of much reviled, it is hard to get more hated than Groupon was not long ago. Yet this quarter had much to recommend itself to, including the potential to unlock significant free cash flow as it turns around the core of its business and eliminates empty calorie franchises. The hope had become the hype, but when CEO Richard Williams said on the call that "we are further along the path to become the daily habit in local commerce", he had the facts and figures to back it up. I like the fact that it has $780 million in cash, with a market cap of $2.9 billion. It can do acquisitions with ease and really turn on the guns.
But perhaps the most ironic of the turns here it Fitbit. I have to tell you that this company has actually never really disappointed in its earnings, but it has repeatedly stung shareholders with its pitiful -- some would say pitiless to shareholders -- guidance. Not this time.
The company's product line-up, which is so strong, and its health and wellness franchise, which is growing more and more moated, truly has distanced itself from the competition, including the much compared-with Apple (AAPL) . You could never sneeze at its revenue growth, 46% year over year this time, but I like the acceleration in growth and the tremendous adoption in Europe. The holiday season should be great, and I say that because this was an exceptional non-holiday quarter.
Etsy, GoPro, Groupon and Fitbit, all stand-outs from the quarter, all realizing their formerly unrealized potential, and all low-expectation places to be as the dog days of summer unfold.