{"id":435047,"date":"2026-07-30T12:53:46","date_gmt":"2026-07-30T05:53:46","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/why-a-stocks-biggest-decline-may-not-be-its-best-buying-opportunity-435047\/"},"modified":"2026-07-30T12:53:46","modified_gmt":"2026-07-30T05:53:46","slug":"why-a-stocks-biggest-decline-may-not-be-its-best-buying-opportunity","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/why-a-stocks-biggest-decline-may-not-be-its-best-buying-opportunity-435047\/","title":{"rendered":"Why a stock\u2019s biggest decline may not be its best buying opportunity"},"content":{"rendered":"<div>\n<p>The Nasdaq-100 is near record highs, but these stocks remain trapped in deep bear markets<\/p>\n<p>The Nasdaq-100 may be trading close to record territory, but the strength of the headline index tells only part of the story. Several well-known growth stocks remain more than 50% below their all-time highs, creating a striking divide between the index\u2019s biggest winners and its most severely damaged constituents.<\/p>\n<p>This divergence matters for investors. A stock that has fallen 50%, 70% or even 90% is not automatically cheap. Some declines reflect a temporary business cycle, while others reveal deteriorating margins, fading competitive advantages or a permanently lower valuation.<\/p>\n<blockquote>\n<p>Key takeaway: The most interesting opportunity may not be finding the stock with the largest decline. It may be identifying which companies retain the earnings power, balance sheet and competitive position required to recover.<\/p>\n<\/blockquote>\n<p>A strong index can hide severe weakness underneath<\/p>\n<p>The Nasdaq-100 is a modified market-capitalization-weighted index. Larger companies have a much greater influence on its direction than smaller constituents.<\/p>\n<p>That means gains in companies such as Nvidia, Microsoft, Apple, Amazon and Alphabet can keep the index elevated even while numerous individual stocks experience deep bear markets.<\/p>\n<p>This creates an important distinction:<\/p>\n<ul>\n<li>\n<p>The Nasdaq-100 can remain technically bullish as an index.<\/p>\n<\/li>\n<li>\n<p>A meaningful group of its components can simultaneously remain in long-term downtrends.<\/p>\n<\/li>\n<li>\n<p>Investors buying the index receive very different exposure from investors attempting to select its most heavily discounted stocks.<\/p>\n<\/li>\n<\/ul>\n<p>The index is therefore not necessarily providing a complete picture of the average company beneath the surface.<\/p>\n<p>Nasdaq stocks that have suffered especially deep drawdowns<\/p>\n<p>The following are selected examples based on prices around the July 29 close. The figures are approximate and will change as prices move.<\/p>\n<p>This is not an exhaustive screen, and historical peaks may require adjustment for stock splits, corporate actions or changes in index membership. Nevertheless, the dispersion is too large to dismiss as ordinary market noise.<\/p>\n<p>Why a 50% decline requires more than a 50% recovery<\/p>\n<p>One of the most frequently misunderstood aspects of drawdowns is the mathematics of recovering from them.<\/p>\n<p>A stock that falls from $100 to $50 has lost 50%, but it must double to return to $100. After a 90% decline, the remaining position must rise ninefold merely to revisit the old high.<\/p>\n<p>This is why anchoring to a former share price can be dangerous. The previous peak does not represent fair value simply because the stock traded there before.<\/p>\n<p>Which declines may be cyclical?<\/p>\n<p>Some companies experience deep drawdowns because their industries move through powerful boom-and-bust cycles.<\/p>\n<p>SanDisk is an especially dramatic example. The stock reached $2,354.39 during an extraordinary rally fueled by demand for memory and storage connected to AI infrastructure. Its subsequent fall toward $1,016 represents a decline of almost 57% in little more than a month.<\/p>\n<p>However, this is not the conventional story of a stagnant company that has been declining for years. SanDisk remains far above where it began its historic rally. Its drawdown may therefore tell investors more about extreme prior expectations and profit-taking than about the long-term disappearance of storage demand.<\/p>\n<p>The investor questions are:<\/p>\n<ul>\n<li>\n<p>Is memory demand merely pausing after an exceptional expansion?<\/p>\n<\/li>\n<li>\n<p>Are selling prices and margins beginning a normal cyclical downturn?<\/p>\n<\/li>\n<li>\n<p>Has the market moved from underestimating AI storage demand to overestimating it?<\/p>\n<\/li>\n<li>\n<p>Can earnings grow into the valuation even if the share price does not revisit its peak?<\/p>\n<\/li>\n<\/ul>\n<p>Semiconductor investors should pay particular attention to inventories, contract pricing, production capacity and customer capital-expenditure plans. Those indicators can reveal whether a decline is a temporary digestion phase or the beginning of a deeper earnings contraction.<\/p>\n<p>Which declines may signal structural deterioration?<\/p>\n<p>Other stocks face problems that cannot be solved simply by waiting for the economic cycle to improve.<\/p>\n<p>PayPal still processes an enormous volume of payments, but the quality of that volume matters. Lower-margin unbranded processing can increase total payment volume without producing the economics investors once associated with PayPal\u2019s branded checkout business.<\/p>\n<p>For PayPal investors, the decisive questions are not whether digital payments will continue growing. They are whether PayPal can protect transaction margins, strengthen branded checkout and convert payment growth into durable free cash flow.<\/p>\n<p>Lululemon presents a different challenge. Its decline reflects questions about North American growth, product execution, promotional activity and competition in premium athletic apparel. A lower price-to-earnings ratio may look attractive, but only if earnings expectations have fallen far enough.<\/p>\n<p>Moderna faces perhaps the clearest revenue-transition problem. The extraordinary demand created by the pandemic has passed, while the company must continue funding an expensive development pipeline. Its recovery case depends increasingly on whether new products can replace a meaningful portion of the lost COVID-related revenue.<\/p>\n<p>Enphase combines cyclical and structural pressures. High financing costs have reduced the affordability of residential solar systems, while regulatory changes and excess channel inventory have intensified the downturn. Lower interest rates could help demand, but investors must still determine whether the company can restore revenue growth and margins in a changed market.<\/p>\n<p>Four tests for separating an opportunity from a value trap<\/p>\n<p>Instead of buying solely because a stock is far below its high, investors can examine four areas.<\/p>\n<p>1. Is revenue stabilizing?<\/p>\n<p>A falling stock can recover before revenue returns to growth, but evidence of stabilization is usually needed. Investors should compare management guidance, analyst estimates and sequential results rather than relying only on year-over-year numbers distorted by an earlier boom.<\/p>\n<p>2. Are margins temporarily or permanently lower?<\/p>\n<p>Temporary margin pressure may come from excess inventory, low factory utilization or short-term promotional activity. Structural margin pressure arises when competition, commoditization or lost pricing power permanently changes the business.<\/p>\n<p>3. Can the balance sheet fund the recovery?<\/p>\n<p>Companies with ample cash and positive free cash flow can survive a long repair process. Highly leveraged businesses or companies burning cash may need to issue shares, refinance debt or reduce investment before the recovery arrives.<\/p>\n<p>4. What evidence would invalidate the bullish thesis?<\/p>\n<p>Investors should decide in advance what would prove their analysis wrong. That could include another guidance reduction, accelerating market-share losses, deteriorating free cash flow or a failure to meet an important product milestone.<\/p>\n<p>An investment thesis without an invalidation condition can easily become an emotional attachment to a falling stock.<\/p>\n<p>What this divergence says about the wider market<\/p>\n<p>The divide between the Nasdaq-100 and its deeply impaired stocks has several broader implications.<\/p>\n<p>First, it confirms that this is a highly selective market. Capital is rewarding a relatively narrow group of companies with visible earnings growth, strong AI exposure or dominant competitive positions.<\/p>\n<p>Second, it creates opportunities for active investors, but also raises the difficulty level. Buying the weakest stocks indiscriminately may produce very different results from owning the index.<\/p>\n<p>Third, breadth can act as an early warning signal. If more constituents begin joining the leaders, the rally becomes healthier. If weakness spreads while the largest companies continue holding up the index, concentration risk becomes more important.<\/p>\n<p>The investor conclusion<\/p>\n<p>The Nasdaq-100\u2019s strength and the severe drawdowns inside it are not contradictory. They are two sides of a market increasingly driven by concentration and company-specific execution.<\/p>\n<p>Deeply discounted stocks may eventually produce some of the market\u2019s strongest recoveries, but the size of the decline alone is not the opportunity. The real opportunity appears when a company\u2019s competitive position and earnings potential are more resilient than its share price suggests.<\/p>\n<p>For investors examining SanDisk, PayPal, Lululemon, Moderna, Enphase or other damaged growth stocks, the central question should not be, \u201cHow far is this below its high?\u201d<\/p>\n<p>A more useful question is:<\/p>\n<blockquote>\n<p>What must improve for earnings, cash flow and investor confidence to justify a durable recovery, and is there evidence that improvement has begun?<\/p>\n<\/blockquote>\n<p>That distinction may separate tomorrow\u2019s recovery leaders from the stocks that remain cheap for a reason.<\/p>\n<p>Stock prices and drawdown estimates are approximate snapshots based on market prices around July 29, 2026. They may change rapidly and should be independently verified before making an investment decision.<\/p>\n<p>                            This article was written by Itai Levitan at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Nasdaq-100 is near record highs, but these stocks remain trapped in deep bear markets The Nasdaq-100 may be trading close to record territory, but the strength of the headline index tells&hellip;<\/p>\n","protected":false},"author":216,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86],"tags":[],"class_list":["post-435047","post","type-post","status-publish","format-standard","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/435047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/216"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=435047"}],"version-history":[{"count":0,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/435047\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=435047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=435047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=435047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}