3 Stocks That Could Crash in 2015

By Markets Fool.com

Must all good things come to an end? It's a familiar pattern: a surging stock outperforms the market for a period of time, only to inevitably crash back to earth. Although it's impossible to predict when these highfliers will experience a correction, yesterday's best-performing stocks are often tomorrow's biggest losers.

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Below, three Motley Fool contributors offer up their picks for stocks that could be poised to crash. Each of the three -- Aeropostale , Altria Group , andJack in the Box -- has been a strong performer recently, but could be poised for a sharp correction in 2015.

Tamara Walsh (Aeropostale): Few sectors are suffering as much as teen retail these days. In fact, specialty teen retail stocks such as Aeropostale, American Eagle, and Abercrombie have lost nearly 40% over the past five years compared to a 160% increase in the S&P 500 retailing sub-index over the same period. Aeropostale has been hit especially hard by weak mall traffic and increased competition from more nimble online competitors such as Amazon.

Despite this weakness, Aeropostale shares have rallied more than 65% year-to-date. Investors pushed shares of Aeropostale slightly higher this month after the company said it expects a narrower loss in the current quarter. The teen retailer now anticipates a fourth-quarter loss in the range of $0.01 to $0.06 per share, which is a significant improvement over its prior outlook for a loss of $0.25 to $0.31 per diluted share in the period. Nevertheless, this is hardly a reason to celebrate.

Not only did Aeropostale recently post its eighth consecutive quarterly loss, but the company also continues to suffer from double-digit declines in same-store sales. Moreover, Aeropostale now plans to close as many as 365 stores through 2016, thereby reducing its total store footprint by nearly 40%. If you remember, we saw similar closures from retailers like Wet Seal and Delia's before these companies filed for bankruptcy.

Aeropostale stock is currently trading around $3.78 or near the low end of its 52-week range. However, it could have further to fall in 2015 as mounting costs from store closures and weak in-store traffic will continue to weigh on earnings.

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Bob Ciura (Altria Group): I believe Altria Group could correct in the upcoming year. Whenever I see the combination of stagnating fundamentals and a soaring stock price, I get nervous. That's exactly what has happened to Altria. In 2012, Altria generated $24.6 billion in total revenue. The following year, Altria's revenue declined to $24.4 billion. Last year, Altria collected $24.5 billion in revenue. As you can see, Altria's revenue barely budges from year to year. In fact, Altria's revenue has grown by just 0.13% per year over the past five years, compounded annually.

Altria has produced significant earnings growth in this time, 6% per year compounded annually, because the company has cut expenses and bought back stock. However, I'm skeptical of any company that manufactures earnings growth without top-line growth, because there's a limit to how much Altria can cut costs. Sooner or later, Altria won't be able to grow earnings without revenue growth as well.

That's not going to be easy for Altria. With smoking rates on the decline in the United States, it's unlikely that Altria will grow revenue this year, since Altria is so dependent on its Marlboro brand. Altria manufactures a wide range of products, including smokeless chewing tobacco, cigars, a wine business, and a large stake in SABMiller plc. But Altria's smokeable products still represent approximately 90% of the company's revenue and profits. With this in mind, I'm not sure Altria will return to revenue growth any time soon.

Add to this that Altria's stock has soared 88% in the past three years. The stock now trades for 21 times earnings, which is an above-average valuation. Because of its expanding valuation and stagnating revenue growth, I think Altria could see a correction this year.

Sam Mattera (Jack in the Box):Burger chain Jack in the Box has been one of the single best-performing restaurant stocks over the last twelve months, even besting fast casual darling Chipotle. In 2014, Jack in the Box shares rallied more than 60%, and have continued their outperformance, surging more than 18% in 2015 on the back of strong earnings results. While Jack in the Box's rally appears to have been prompted by legitimate performance, the stock could still be poised to suffer from a correction in 2015.

Jack in the Box's core business -- its namesake burger chain -- is fairly mature. Although it's mostly confined to the western portion of the United States, Jack in the Box has not meaningfully increased its store count in several years. Still, it trades with a relatively lofty valuation -- 42 times trailing earnings -- compared to its more established peers. But that valuation isn't completely unjustified -- Jack in the Box owns Qdoba, a fast-growing, fast-casual burrito restaurant largely similar to Chipotle. Qdoba has been enjoying strong growth and robust sales: last quarter, same-store sales at franchise-owned Qdoba locations rose 15.1%.

This sales growth may be the byproduct of an aggressive new strategy aimed at greatly expanding the Qdoba business. So far, it's clearly working, but the reimaging of a concept carries risk, and investors may be getting ahead of themselves. With the growing number of publicly traded fast-casual concepts, Qdoba seems likely to face rising competition to attract both customers and investors. That's not to suggest that Qdoba is doomed to collapse, but any slowdown in its growth could be met with a sharp sell-off.

The article 3 Stocks That Could Crash in 2015 originally appeared on Fool.com.

Bob Ciura owns shares of Altria Group,. Sam Mattera has no position in any stocks mentioned. Tamara Rutter owns shares of Amazon.com. The Motley Fool recommends Amazon.com and Chipotle Mexican Grill. The Motley Fool owns shares of Amazon.com and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.