It looks like the market is going to end the year on a winning note. With about a week to go, the S&P 500 is up 25%. Interest rates have started to come down, inflation is moderating, and the economy is demonstrating resilience.
Some of the stocks that have been leading the charge this year remain well-positioned to keep it up. But others that haven't been as positive for investors could bounce back. Wayfair(NYSE: W), Opendoor Technologies(NASDAQ: OPEN), and Disney(NYSE: DIS) are beaten-down right now, but there are reasons to suggest they could rebound in 2025.
1. Wayfair: Furniture for all
Wayfair's core business is home furnishings, but it's built an Amazon-like platform selling much more. It owns several brands at different price points to target a large range of furniture buyers, with the Wayfair brand selling all sorts of other things. What makes it different than other large online retailers is that it works with a dropshipping model, which means it doesn't buy and keep inventory, but rather acts as a platform for suppliers. It also has a well-developed logistics system that gets large, heavy merchandise to customers quickly and safely.
In theory, this should be a low-cost, profitable venture. Wayfair is a huge company, with $11.9 billion in trailing 12-month revenue and 21.7 million active customers. But Wayfair has been a money-loser for a while.
It's making progress on turning a profit. Its short-term goal is for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to surpass equity-based compensation and capital expenditures, and it reached it by almost $100 million in the third quarter. It's an impressive result considering the difficult economy in which Wayfair is operating right now. The poor housing market is weighing on home furnishings companies, and it isn't just Wayfair that's seeing its revenue decline.
However, with its huge web presence and more efficient focus, Wayfair is in place to bounce back with lower interest rates. Although the Federal Reserve is now indicating that its rate cuts might be slower than it originally thought, those rates have started to go lower, and that could continue in 2025. As rates ease and the housing market picks up, Wayfair stock could be a big winner next year.
2. Opendoor: Disruptive real estate
Opendoor is a digital real estate platform, and it's feeling similar pressures to Wayfair. However, it's more directly affected by a poor housing market, and slumping business has meant a slumping stock price.
Unlike Wayfair, Opendoor buys and sells its merchandise, which in its case is homes. That's a capital-intensive business, if a fairly straightforward one, and Opendoor has been struggling to sell its wares and turn a profit. There has been some progress. Revenue increased 41% year over year in Q3, even though it remains well below its highs. Opendoor sold 3,615 homes, 35% more than last year. It has 6,288 homes in inventory as of the end of Q3, up 64% year over year, so it's going into the new year in a strong position to sell.
So far, the housing market isn't budging much, although according to Redfin data, home sales increased 4.4% year over year in November. But lower interest rates and people putting off buying and selling for too long may lead to some easing pressure next year. Opendoor could see a strong turnaround if that happens, and its stock will reflect that.
3. Disney: Profitable streaming
Disney is the unmatched global entertainment giant, but its stock is still 45% off its all-time highs. A mix of factors have led to volatility in several of its businesses. Park closures gave way to streaming losses, and throughout the different phases, its linear networks have been fading. As this has been playing out, CEO Bob Iger left and came back, and Disney is now heading in a better direction.
For one thing, streaming was profitable for the first time in the 2024 fiscal fourth quarter (ended Sept. 28). That's been a goal for the company since it launched Disney+ five years ago. Total entertainment segment operating income was $1.1 billion, up from $236 million last year. It's sliding into 2025 in an excellent position to keep this up, with 4.4 million more subscribers than last year.
The company is also back to producing blockbuster hits. It has the two top-grossing films in 2024, Inside Out 2 and Deadpool & Wolverine, with the recently released Moana 2 in the fifth spot. Plus, Mufasa: The Lion King was just released.
It has a strong slate going into 2025, with Captain America: Brave New World, Lilo & Stitch, The Fantastic Four: First Steps, Zootopia 2, and Avatar: Fire and Ash. This is Disney's forte -- recycling mega-hits into more money-makers. If you've been debating about investing in Disney stock, this could be a good time to press the button.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Amazon and Walt Disney. The Motley Fool recommends Opendoor Technologies, Redfin, and Wayfair and recommends the following options: short February 2025 $10 calls on Redfin. The Motley Fool has a disclosure policy.
