No Growth, Stock Tanks

Hey Market Pilot,

At one point, some of the biggest names we follow now were growth stocks. Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Facebook (FB) were all growth stocks because there was something about them that was revolutionary and they had a huge ability to “grow” into their market. Think about a company that is disrupting the status quo or entering the scene with a product or service which no one has seen before.

A growth stock can also be a “flash in the pan” since something that is once new and exciting, can become old and obsolete or simply saturated almost overnight. Think of Blackberry, GoPro, Zoom, Peloton.

Blackberry was once the hottest device around, but was blown out of the water when the iPhone ushered in touch screens. GoPro was the toughest little camera with awesome wide-angle lenses and HD resolution, but was easily copied by other large manufactures which saturated the market and lowered prices. With GoPro being a one-trick pony, the company had nowhere to turn, and thus the stock fell.

Zoom and Peloton were both pandemic darlings with nearly instantaneous growth as people had to change everything indoors and online. But these, too, are easily replicated business models and the customer base had already grown to what it would ever be. Therefore the lack of sustained growth is what took the stocks down.

So keep in mind, a growth stocks are exactly that. These can burn brightly, but unless the companies continue to reinvent or find new ways of staying relevant and increasing sales when the growth declines, so does the stock.

Your Profit Pilot, TG


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