2024's Underperforming Stocks Eyeing a Strong Comeback in 2025

 

Hi everyone, the countdown to 2024's end is officially on, and with the holiday season almost upon us, many traders might be taking a breather. But before you tune out for the year, let's talk about a juicy topic that's been circulating: stocks that have struggled this year but could see a significant rebound in 2025.

 

According to Evercore ISI, led by strategist Julian Emanuel, some of the hardest-hit stocks in 2024 could be ready to rise again. The team's analysis is based on tax-loss selling, which typically takes place in the last weeks of the year. Investors often offload their biggest losers to offset capital gains – and that creates potential opportunities for those brave enough to pick up some of these fallen stars.

 

 

One of the most intriguing takeaways from Evercore's research is the focus on small-cap stocks, particularly those in the Russell 2000 index. These smaller companies have lagged behind the broader market, with the Russell 2000 up only 10.6% YTD compared to the 24% rise in the S&P 500. Why does this matter? Historically, smaller stocks tend to outperform in January, and with the Fed still maintaining an easing bias, small-caps could be set up for a solid rally early next year.

 

Evercore's team is especially bullish on this, noting that these stocks are currently trading at a below-average premium to the S&P 500. Translation? There's value in them – if they can catch a break.

 

 

So, which stocks have the potential to rebound in 2025? Evercore flagged a few names that stand out:

 

1. Nike ($NKE) – Nike's been hit hard in 2024, but the company recently lowered its earnings guidance, which could be a strategic move to buy some time. Evercore analyst Michael Binetti believes that if Nike's fundamentals start to show signs of improvement in mid-2025, the stock could start trading on normalized margins and recovery multiples. A solid turnaround play if it gains momentum.

 

2. ZoomInfo (ZI) – ZoomInfo is down year-to-date and hasn't been generating much excitement. But it's part of the low-momentum group that could benefit from a fresh start in 2025. A rebound for this tech stock might come as businesses retool their sales strategies after a rough 2024.

 

3. Avis Budget ($CAR) – With the travel industry facing uncertainty this year, Avis has seen its stock struggle. But rental car stocks tend to perform well when travel picks back up, and if 2025 sees a rebound in consumer spending, Avis could be a key beneficiary.

 

4. Cleveland-Cliffs ($CLF) – Cleveland-Cliffs, a steel giant, has had a rough time in 2024 due to weak demand in the industrial sector. However, a potential boost from infrastructure projects and a broader economic recovery could lead to a strong rebound for the stock.

 

5. StoneCo ($STNE) – A fintech company that's been weighed down by the overall market volatility, but as digital payments continue to expand globally, StoneCo could see a shift if it positions itself in new markets or expands its services.

 

Here's their full list of tax-loss losers that are set to rebound:

 

 

 

While this list is interesting, I'm not fully convinced these stocks will be slam dunks. Sure, tax-loss selling could create short-term momentum, but these companies still need to prove they can grow sustainably in 2025. Nike, for example, is on the right track by lowering its guidance to manage expectations, but its real test will be in the execution of its turnaround plan. I'm personally intrigued by Avis Budget, as travel looks set to rebound, and Cleveland-Cliffs could see a recovery if industrial demand picks up.

 

However, I'd be cautious with ZoomInfo and StoneCo. Both are operating in highly competitive and rapidly changing markets. They could get left behind if they don't innovate fast enough or if market conditions worsen.

 

So, While these stocks could be due for a rebound, the devil is in the details. Momentum and fundamental improvements will be crucial in determining whether they can bounce back in 2025, or if they'll remain stuck in the rut.

 

Do you agree with Evercore's picks? Are there other tax-loss candidates you're eyeing for the new year?