Ten Companies That Will Never Trade At Their All-Time Highs

Some of the best known publicly traded companies in the world have stocks that will never reach their all-time highs again. Many of them are not troubled firms. In a number of cases, they simply do not grow as rapidly as they did in the past. Alternatively, they may have had one or two catastrophes that badly damaged their fortunes. Microsoft is an example of the first case; Citigroup of the second.

Read The Ten Companies That Will Never Reach Their All-Time Highs

24/7 Wall St. put together a list of ten extremely well-known companies whose share prices have already reached their peak. We have also given an explanation of what would have to happen, in the most remote of cases, to push the shares of these companies back to their former highs. These cases are merely speculative, and serve only to give an indication of why the best days of the firms are behind them — at least as far as share price is concerned.

This article is really about what it was like for Google to overtake Yahoo! — because of better products and more rapid growth — only to be overtaken itself by a competitor like Facebook, which dominates the time people spend online. We have looked at what it is like to be Ford in an age when U.S. car companies had the lion’s share of the domestic market before the success of Japanese companies, and before bloated labor costs and a recession ate away their profits.

This is 24/7 Wall St’s list of  Ten Companies That Will Never Trade At Their All-Time Highs

1. BP plc
BP plc (NYSE: BP) has recovered from its Gulf of Mexico woes with shares at $44.00 today. Shares were above $70 between 2006 to 2008 when the energy boom was taking place and crude moved above $140 briefly. After cratering to $40 or so during the energy bust of 2009 and the recession, shares recovered back to $60. While some thought that after the Deepwater Horizon explosion in the Gulf of Mexico BP would declare bankruptcy, shares actually sharply recovered over the last year, only to run into some headwinds of late. BP still faces potentially billions in liabilities related to the massive spill, and there are few positive catalysts. The damage to BP’s brand has been done even though it has set up liability funds and fired its CEO.

For BP to get back to its former highs will take a magnificent breakthrough above and beyond what other oil giants in America may do. The company would have to discover huge reserves, which would ensure ample supply for decades. It would require a multi-year brand retooling, and massive gains in its international markets such as Russia and Middle East. In these geographic areas, BP can get oil cheaper rather than just payments for its expertise, which goes with some of its exploration licences. At a market cap of $139 billion, its former glory days are long-gone, unless another disaster moves the spotlight elsewhere and memory of Deepwater Horizon with it. Not likely.

2. Gap
Gap Inc. (NYSE: GPS) is back under $19.00 after its recently awful guidance. While shares doubled from the lows of the recession as its financial situation turned around, things are not just hard now; they are harder by comparison to the last several years. Gap has lost its edge against more hip competition since the late 1990s when the stock peaked around $50.00. After that, Gap’s market’s valuation premium eroded rapidly, and when the recession hit, shares sank to $10 before recovering into the low $20s. Some gains have occurred under new leadership, but the company has moved to the lowest rung of the industry, and even its share buyback may not be aiding any longer.

For Gap to get back to its former glory days seems almost impossible. It has a $10+ billion market cap now. Most likely, it will require spinning off Old Navy, Banana Republic, Athleta, and even the Piperlime operation. The only chance we see is for one of the other brands to be unleashed under new management. Gap shares won’t be able to move higher with another share buyback, although they may gain if it were to get even more aggressive on its dividend policy. Even then, Gap’s best days of growth are long gone, and the task of regaining its former peak now seems almost outlandish.

3. General Electric
General Electric Co. (NYSE: GE) traded recently at $18.41. Its stock has bounced back about 200% from the lows of the 2009 aggressive selloff. Shares were trading just above $40.00 in 2007, before the wheels fell off the economy in 2008. The stock was actually closer to $60.00 at the peak of 2000, back when valuations of most large companies were higher than they are now, and when Jack Welch was at the helm. The valuation crush and recession of 2000, followed by the failed Honeywell acquisition and the aftermath of 9/11, took all of GE’s momentum away, just as Jeff Immelt was taking over the company.

What exacerbated the stock’s losses during the recession — more than any other multinational and multi-line company — was that the investment community has considered GE as half a bank and half a conglomerate. While GE has managed to recover handily at the P&L level, there has been a stall in its stock recovery in 2011. That is despite the fact that it was recently ranked as our most attractive conglomerate for upside and value.

For GE to ever come close again to its former glory days will be no easy feat. It will require an incredible economic recovery with all of GE’s main growth engines reaching peak sales and margins. It may also require a breaking up of the conglomerate into many pieces to unlock value, something the company has fought even if it has been willing to shed units.

4. Pfizer
Pfizer Inc. (NYSE: PFE) hit a recent high earlier this year of just above $20.00, and its stock recently closed at $19.75. Shares traded above $45.00 in the late 1990s and in the early part of the last decade when Viagra ruled the pharma world. While Pfizer’s valuations suffered in the early part of the last decade, the concerns around Cox-2 Inhibitors after Merck’s woes only added to concerns. Now, shares have recovered from a low of under $13.00, but drug valuations in general just aren’t what they were before large generic drug companies took over much of the pharma market. Pfizer and its competitors face a significant patent wall when many key blockbuster drugs will be open for generic competition. Even a great share buyback of more than $23 billion since 2004, as well as acquisitions, divestitures, and a 4.1% dividend yield, have not helped the company regain the footing it had a decade and a half ago.

For Pfizer to reach its all-time peak share price will require a miracle or a breakthrough discovery that is just not factored into its price and its $150+ billion market cap. Maybe an acquisition will help, although the mega-deal with Wyeth did little for its stock. It seems that it will have to be a series of discoveries of major drugs to move shares much higher. Pfizer could benefit from a large acquisition, but that would be a “been there, done that” as far as Wall Street is concerned.

5. Research-in-Motion
Research-in-Motion Ltd. (NASDAQ: RIMM) is down under $30.00 now, after having traded at a peak of over $140 in the summer of 2008. RIM was the predicted winner of the smartphone wars as its corporate and enterprise handsets created an addiction among business users. Then, it hit the fan… The recession’s financial damage was one thing, but the introduction of Apple’s iPhone and the rise of Google’s Android have single-handedly brutalized the Blackberry culture of smartphones and the company has never been able to be thought of as “cool” again. There are some, even now, who hope that RIM can pass as a value stock; or  that it might restructure and trim fat; or perhaps that it can find a merger partner. Sadly, our most recent market share data show that at the current rate of erosion it will be about seven quarters before RIM has no market share at all.

6. Ford
Ford Motor Company (NYSE: F) is arguably the best run car maker in the U.S. The company avoided bankruptcy in 2008 when its two peers — GM and Chrysler — went under. Ford trades at $14 now, up from just over $1 it hit when the recession in car and light truck sales was at its worst. Ford reached an all-time high of nearly $40 in 1998 before overseas manufacturers took more than half of the domestic car market. That tide has changed recently. Ford now handily outsells Toyota in the U.S., and has a strong presence overseas, particularly in Europe and Latin America.

For Ford to trade above its all-time high it would likely need to overtake GM in worldwide sales. The larger company is now the No.1 manufacturer in the world, to some extent because of its remarkable success in China where it is one of the dominant car companies. Ford is not nearly as successful as GM in the People’s Republic. China is now the world’s biggest auto and light truck market by far. Ford, like every other major firm in the industry, has to do well there to be a global success.

7. Google
Google Inc’s (NASDAQ: GOOG) shares reached $747 in October 2007, pushed to that level as global stock markets rallied to all time highs and as the search company’s sales rose 60% to $16.6 billion. Net income rose nearly as much to $4.2 billion in 2007. Google has become a victim of its own success. Investors, who have come to expect hyper-growth, now hold shares in a company that saw revenue growth of “only” 32% to $9 billion in the last quarter. Google has entered some businesses that appear successful, at least on the surface. Its Android mobile operating system has gained market share in the smartphone business, but it is not clear how Google makes money. The same is true of its huge video-sharing service — YouTube.

Google’s ability to get back to its all-time high would depend on at least three things, none of which likely to happen. The first is that Google’s U.S. market share would increase from its 65% level. Microsoft and Yahoo! have built their businesses enough so that is not likely to happen.  Google would also need to grow its market share in China — the world’s largest nation based on Internet population, with 463 million users. Google has a less than 20% market share there, where the dominant firm is Baidu. Google would also need to show large profits on businesses outside its core search franchise, which is something it has not be able to do.

8. Citigroup
Citigroup, Inc (NYSE: C) trades at $38. It was the largest financial services company in the world, built by financier Sandy Weill, who put global investment bank, consumer banking, brokerage, and corporate financial operations under one roof. Shortly after the roll-up that created the company finished, the stock reached $585 in late 2000. It traded near that level again in January 2007, just before the credit crisis did nearly fatal damage to the worldwide financial markets. Just after Bear Stearns and Lehman Bros folded, Citigroup dropped to $10. The federal government saved the bank, but not after it’s suffered tens of billions of dollars in losses on mortgage-backed assets.

Citigroup has practically no chance to push its stock back toward $600. The financial firm would need to become the dominant bank in corporate services which would include equity and debt underwriting, M&A, and investment banking. It would have to regain its top spot as the world’s largest consumer bank and brokerage firm. Finally, Citi would have to clear its balance sheet of the mortgage-backed securities it still holds and the liability from the paper it sold to clients.

9. Microsoft
Microsoft Corporation (NASDAQ: MSFT) continues to be the largest and probably most profitable software company in the world. Shares reached almost $60 late in 1999.  The problem is it no longer grows anywhere near the rate it did a decade ago. At $27, its share price is about the same as it was when CEO Steve Ballmer took over in 2000. Microsoft is still remarkably profitable. It had record net income of $18.7 billion in its last fiscal year on revenue of $62.5 billion. The firm’s three traditional product lines — Windows, Services, and Business — continue to have high margins. Microsoft’s devices business, which makes and markets the Xbox, and its online search and content operations, do not.

For Microsoft’s share to reach their all-time high, one of two thing would have to happen. First, it could spin off its weaker game and search divisions and pay out a large portion of its $50 billion cash balance to shareholders to share the highly profitable software portion of the company. The other, less likely alternative, is that a number of Microsoft’s new initiatives would work perfectly. This would include its joint venture with Nokia to become a leading provider of smartphone operating software, and a rapid revenue growth of its newly acquired VoIP operation — Skype.

10. Gannett
Shares of Gannett Co. Inc (NYSE: GCI) trade for slightly below $14. The country’s largest newspaper company and the owner of USA Today reported Tuesday a 2% revenue drop to $1.3 billion. Digital advertising rose 13% to $173 million, but that was not nearly enough to offset battered print sales. Gannett’s shares traded just above $86 in early 2004, before online ad sales had become a significant revenue stream in comparison to newspapers or TV. By March 2009, when print advertising was in free fall, they’ve reached a low of $2. Gannett continues to cut jobs, and recently laid off 700 workers, but eventually it will run out of people. The company cannot compete effectively in a world in which firms like Facebook have 700 million users and control a lion’s share of the online market. Print advertising has become an inefficient way to reach people who can be targeted by demography and product preferences online.

It is hard to imagine how any newspaper company could reach previous highs. Gannett has cable and broadcast TV operations. But neither is considered undervalued because each is a part of old media. Even broken into parts, Gannett is not worth terribly more than is reflected in its stock price.

Jon Ogg & Douglas A. McIntyre