00:00 Here are 5 stocks facing a huge 2023
00:03 Number 1, Match Group At its peak in October 2021, Match traded
00:07 at around 50x adjusted EBITDA. Fast forward to today and that multiple based on guidance
00:12 is only 14x and the stock has dropped 70%. Much of that multiple compression can be attributed
00:19 to a drastic cut in profit growth to only 5%. An unofficial outlook puts revenue growth
00:24 at only 5-10% for 2023 as well. That's a significant reduction in growth and some of
00:30 Match's legacy brands like Plenty of Fish appear to be in decline. But Hinge is still
00:36 growing and Match continues to drive margins over 70%.
00:40 Straddle pricing in the options market suggests a move of over 40% in 2023 for Match stock.
00:46 So whatever happens, it looks like Match Group has a big year ahead.
00:50 Number 2, Six Flags Stock 2022 was a banner year for theme parks but
00:54 Six Flags badly underperformed. A lot of this stems from a change in business strategy.
01:00 New CEO Selim Basul said the parks have become day centres for teenagers. Some customers
01:05 have literally been making TikToks on how to live off the Six Flags dining pass. So
01:10 Basul created a new premiumisation strategy in which Six Flags gets fewer guests, paying
01:15 higher prices and in theory a better experience. But customers and employees are up in arms
01:21 about the changes with complaints flooding in.
01:23 And with activist investor Landon Buildings entering the fray, it's easy to see the
01:28 potential for movement in Six Flags stock. This is a crucial year where Six Flags simply
01:33 needs to show progress towards its goals.
01:36 Number 3, Shopify. When Shopify reported first quarter results in May last year, the stock
01:41 tanked 30%. But the stock has traded sideways since and that suggests the market hasn't
01:46 quite figured out what comes next. After all, how many small and medium sized businesses
01:51 on the Shopify platform are going to survive the coming year? And can Shopify's expansion
01:56 into international markets take hold?
01:58 In Q3, Shopify discussed a merchant list that included Panasonic, Cole Haan, Converse and
02:03 Greenies Pet Treats. Hardly blue chip names. And can Shopify really compete with Amazon,
02:09 particularly on logistics? It's a huge task but Shopify occupies a growing niche and a
02:14 good brand. Whatever happens, it's going to be a huge year for Shopify. The options
02:19 market implies a move of more than 50% by January 2024 and that sounds about right.
02:25 Number 4, the LoveSac company. LoveSac began as a manufacturer of bean bag chairs before
02:30 pivoting towards modular couches called Sanctionals. A 2018 IPO saw LoveSac close at $24 but it
02:37 ended 2022 just above $22. In other words, the stock's gone nowhere. But revenue at
02:42 LoveSac continues to increase at a rapid pace. Revenue grew 37% through the first three quarters
02:48 of 2022. Yet, that has a lot to do with store expansion. Store count increased 40% over
02:54 the same period. Meanwhile, margins have been crushed. Adjusted EBITDA margins have fallen
02:59 from 7.8% in 2021 to just 2.9% in 2022. There's a question whether this can be a real business.
03:08 After all, LoveSac opened more than 60 stores before and it filed for bankruptcy in 2005.
03:13 Yes, LoveSac is a different business now but profit margins likely need to improve. The
03:19 stock still has a high amount of short interest, indicating that traders remain sceptical.
03:24 Number 5, Spectrum Brands. To anyone paying attention, 2023 is a pivotal year for Spectrum
03:29 Brands as the company will see the resolution of its planned sale of its hardware and home
03:34 improvement business to Sweden's Assa Abloy. The deal, valued at around $4.3 billion, faces
03:40 an antitrust lawsuit from the US Department of Justice. But news since the announcement
03:44 indicates there's every chance the deal goes ahead. In December, Assa Abloy sold its
03:49 Emtek and Smart residential brands in order to assuage competition concerns and Spectrum
03:54 itself remains resolute that competition concerns are absolved. But Spectrum as a company is
03:59 facing inflationary pressures, Q4 earnings badly missed and that indicates potential
04:04 downside if the deal falls through. Overall, there's still a case for buying Spectrum
04:08 Brands but the risk/reward is not as good as it once was.
04:11 So that's 5 stocks to look out for in 2023. For more detailed investing ideas, visit our
04:16 website overlookedalpha.com and all the best for the new year.
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