3 Stocks That Could Tank in 2015

Stock prices fluctuate for many reasons, from lofty valuations and geopolitical issues to quarterly earnings results. With 2014 nearly done, now's a great time to look at where specific stocks could be headed in the new year. Below, three Motley Fool contributors explain why 2015 could be a challenging year for Hewlett-Packard , Best Buy , and Reynolds American .

Bob Ciura (Hewlett-Packard): Hewlett-Packard is a tech stock that I think could tank next year. This might be a surprise, given how well the stock has performed. Over the past two years, shares of HP are up an amazing 181%, which handily trounces the 47% return for the S&P 500 over the same period. Of course, it's worth noting a few caveats. First is that HP's two-year return looks so good because the stock collapsed in the year prior. And, a lot of enthusiasm has been built into HP's planned spinoff, which doesn't really change the company's fundamental challenges. HP's stock price has risen dramatically, but the fundamentals aren't keeping up, and that's why I'm skeptical that HP's rally can continue.

HP is still too heavily reliant on printers, which are an aging technology in the digital world. Printers comprised 20% of HP's revenue in fiscal 2014, and revenue fell 3% in that product category last year. This is serving as a real anchor on HP's companywide revenue growth. Earnings are staying afloat thanks to aggressive cost cuts. HP has now laid off 55,000 workers in CEO Meg Whitman's tenure. This includes 5,000 job cuts announced as part of HP's planned split.

Speaking of the spinoff, I don't see how HP splitting itself into two separate parts is a game-changer. HP will separate its faster-growing corporate services business, which will be called HP Enterprise, and its more sluggish computer and printer businesses, which will be called HP. But this essentially just creates one "good" company and one "bad" company. The bigger challenge is for HP to grow in new areas, such as the cloud, which has not materialized yet. HP is falling behind other tech companies like Microsoft, which is hitting it out of the park in the cloud, and HP is increasingly looking like an aging relic in the technology sector.

Rich Duprey (Reynolds American): Shares of tobacco giant Reynolds American are up 38% over the past year, lifted in large part by the pending $27.4 billion merger with rival Lorillard. It's a union that will substantially increase its ability to challenge industry leader Altria, as the combined company will control 42% of the U.S. cigarette market compared to its rival's 50% share.

Reynolds and Lorillard have tried to line up as many ducks as possible to smooth regulatory approval of the agreement, but there remains substantial opposition to the deal. And that's a problem for Reynolds, as well as the basis for my believing it will fall hard in 2015. The merger is not a fait accompli.

Despite agreeing to sell off a number of brands including Kool, Salem, and Winston, as well as the current market-leading electronic cigarette, blu eCig, to Imperial Tobacco -- in the process elevating it to the position of fourth largest tobacco company -- the merged tobacco companies and Altria will still essentially function as a duopoly, controlling 90% of the market.

Aside from the anti-competitive nature of the merger creating a roadblock, Reynolds is betting big that its e-cig business, including Vuse, will gain more traction and overtake blu, whose market share fell from nearly 50% to under 30% this past quarter.

Both it and Altria rolled out their respective e-cig brands nationally this summer, and while they stole large swaths of blu's share on the back of a heavy promotional campaign, one in three e-cig smokers still chose the Lorillard brand. And e-cigs aren't the only game in town. Personal vaping systems, or PVSs, are a new threat that's growing faster than the e-cig market.

In short, a lot of hope in the completion of the merger has been priced into Reynolds' stock. There's a lot more downside risk, risk I believe is more likely than not to be realized.

Tamara Walsh (Best Buy): The consumer electronics giant has made a comeback in the two years since 2012, when it was one of the worst-performing stocks in the S&P 500. New management at the helm coupled with Best Buy's Renew Blue plan have helped the bricks-and-mortar chain lock in annualized cost savings of $965 million to date. There is no denying that Best Buy is in better shape today, but the big-box store's future is still far from assured.

Best Buy's cost structure can only improve so much. The retailer says it will continue to shrink its store size, optimize the cost of goods sold, and enhance its supply chain going forward. However, none of those things solves the underlying problem of increased price competition from more nimble online retailers like Amazon. With shares of Best Buy up more than 143% in the past two years, 2015 could be a difficult year for the stock -- particularly as the company continues to struggle with market share losses and deteriorating margins.

The market appears overly optimistic about Best Buy's recovery, with the stock trading near the high end of its 52-week range today. Moreover, the retailer still has a lot to prove as it attempts to reinvent itself amid changing industry dynamics. I suspect investors will lose patience with Best Buy in the year ahead as rivals with competitive advantages like expedited shipping and superior pricing continue to poach customers from the big-box chain.

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

Bob Ciura owns shares of Altria Group. Rich Duprey has no position in any stocks mentioned. Tamara Rutter owns shares of Microsoft. The Motley Fool owns shares of Microsoft. 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.

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