Although it may be counterintuitive, it makes sense to buy stocks when they're down. Getting a great deal can lead to huge gains that you might not see if a stock is overpriced.

There are several caveats to that, though. Most importantly, it only works if you can find amazing stocks that you can be confident about. Stocks that are falling because there's trouble on the horizon could be value traps.

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If you're looking for top stocks that are down right now but could soar soon, Shopify (NASDAQ: SHOP), SoFi Technologies (NASDAQ: SOFI), Revolve Group (NYSE: RVLV), Nu Holdings (NYSE: NU), and RH (NYSE: RH) are excellent choices.

Image source: Getty Images.

1. Shopify: 37% off highs

Shopify is a leader in e-commerce, but it doesn't sell products; it sells e-commerce services like websites and payment processing. It has moved from a model catering to small businesses to a full-service commerce model with components and packages to meet demand at every stage and size.

It's growing rapidly as well as becoming highly profitable. In the 2025 first quarter, revenue increased 27% year over year, and operating income was up 136%. It's benefiting from the organic tailwinds of increasing e-commerce sales, and it has other growth drivers in launching new features and expanding internationally.

Shopify stock fell when pandemic-fueled growth began to decelerate and it built out too quickly before demand dropped. It's gotten itself into great shape, though, and it's likely to surpass its previous highs and climb higher.

2. SoFi: 40% off highs

SoFi is an online bank that's growing quickly, attracting new members at high rates and becoming profitable. Adjusted net revenue increased 33% year over year in the first quarter, and it added 800,000 new members. The low-cost, fee-based financial services segment increased 101% over last year, and that's boosting profits. Adjusted earnings per share (EPS) were up from $0.02 last year to $0.06 this year in the quarter.

The company has expanded from its roots as a loan business, and that's helping protect it while interest rates have been high. But the loan business is improving, too, with lower default and delinquency rates in the first quarter.

SoFi stock soared to astronomical valuations when it went public in a strong bull market, and it couldn't sustain its unreasonable levels when inflation hit and interest rates were raised. But it's rallying now, and it has incredible long-term opportunities.

3. Revolve: 76% off highs

Revolve sells clothing, shoes, and accessories on its fashion websites, and it uses artificial intelligence (AI) to drive sales and savings. It works with celebrities and social media influencers to reach its target audience of young, stylish shoppers, and it has developed a robust digital presence and loyal following. Sales had been declining when inflation was climbing, but active customers and orders placed have continued to rise, and sales and profits are climbing again. In the first quarter, sales increased 10% year over year, while net income rose 5%. As usual, active customers increased, 6% year over year, and total orders placed were up 4%.

As more companies start to imitate its digital, AI, and social media model, Revolve has a first-mover's edge. When the economy is in a better place, Revolve is well positioned to thrive.

4. Nu: 23% off highs

Nu is an all-digital bank and financial services company operating in Brazil, Mexico, and Colombia. It is a leader in disrupting the traditional banking sector in its region, and it's bringing in customers at a rapid pace. It already has more than half of the adult population in Brazil as members, but it's still adding new ones to the tune of about 1 million monthly, and this is in part because it has gone beyond its original core customers who couldn't access the banking system, which has high barriers to entry, and it's now targeting a more affluent consumer base. As fast as it's growing in its hometown of Brazil, it's growing even faster in Mexico and Colombia, and it sees international expansion down the line.

It reports high growth every quarter, with a 40% sales increase year over year in the first quarter. Net income increased 74% to $557 million, and the interest-earning portfolio was up 62%.

Nu fell earlier this year when investors were worried about high inflation and instability in Brazil, and on the news that Buffett sold out of it. But it's back in favor with the market because it doesn't have exposure to U.S. tariffs, and there's massive long-term potential.

5. RH: 74% off highs

RH is a luxury furnishings retailer, but it's styling itself these days as a global luxury brand. It has a small list of global galleries, most of which are in affluent cities in the U.S., but it's been expanding with stores in the United Kingdom and other large European cities. It also owns several restaurants and offers "experiences" like a guesthouse and yacht rentals.

It has a fair amount of resilience since it targets an upscale crowd, but even that hasn't been able to pull it through inflation without damage as consumers put discretionary items on hold. However, it might be on the rebound. It reported solid results in the 2025 fiscal first quarter, including a 12% year-over-year increase in revenue and a 7% adjusted operating margin.

It may take time for RH to get back to its previous highs, but as it turns a corner, now looks like a good time to buy.

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Jennifer Saibil has positions in Nu Holdings and SoFi Technologies. The Motley Fool has positions in and recommends Revolve Group and Shopify. The Motley Fool recommends Nu Holdings and RH. The Motley Fool has a disclosure policy.

RH (NYSE:RH) reported Q1 2025 results on June 12, 2025, with revenue up 12% year over year, adjusted operating margin of 7%, adjusted EBITDA of 13.1%, and free cash flow of $34 million. The company maintained full-year guidance for revenue growth of 10%-13%, adjusted operating margin of 14%-15%, adjusted EBITDA margin of 20%-21%, and free cash flow of $250 million-$350 million, despite significant tariff-driven disruptions and an exceptionally depressed U.S. housing market.

This summary dissects key strategic advances in global expansion, pricing and membership strategy, and balance sheet optimization, linking each to explicit management commentary and situational context from this quarter's call.

Global Expansion Achieves Breakthrough Traction Amid Execution Challenges

Despite volatile macroeconomic and supply chain conditions, RH's international galleries posted robust demand growth, with RH England's gallery and online business up 47% and 44%, respectively, year over year, and continental European galleries RH Munich and RH Dusseldorf up 60% across two comparables. Management emphasized initial challenges optimizing inventory and assortments for European markets, where five-month lead times on special orders and earlier product localization missteps presented execution friction.

"... when you really look at the patterns, you look at it closely, you look at what you are doing right, you look at what you are doing wrong, is that the RH brand as it is today we believe we have kind of enough data to say it can be as disruptive and productive in Europe as it can be in America. You know? And that is what the early trends look like. The early trends are littered with what I would call just choppy execution. Right? A company in America trying to open a company in Europe. You know, we are not experts there. ... if we just do kind of three big things our team believes our business can double. That is how many customers you know, we are turning away. Know? And we have got five-month lead times on special orders. So I sit here and go, wait a yeah. We can see the trends across all of these galleries and you know, some better than others as you know, they are going to be and you know? But the most part you know, they are going to trend, I believe, over the next couple of years to levels that will drive four-wall profitability. You know, four-wall cash contributions as good or better than the U.S. That is what it is starting to look like."
— Gary Friedman, Chairman and CEO

Clear evidence of pent-up demand suggests that improving operational execution and localization in Europe will unlock material incremental profitability and accelerate global brand scalability, directly supporting the long-term international growth thesis.

Permanently Enhanced Membership Discount as a Market Share Offensive

Management unveiled a strategic increase in the RH membership discount from 25% to 30%, ending a five-year internal debate and signaling a structural shift rather than a temporary promotion; the change is permanent for all members going forward. The move follows a short-term 35% membership discount on outdoor products during a compressed peak season, explicitly aiming to augment market share while preserving long-term brand value and profitability.

"Just so you know, Simeon, the 30% is a strategic move. It is not it is not temporary. And our cash flow is our guidance. The 30% off membership is forever."
— Gary Friedman, Chairman and CEO

This structural, margin-supported discount enhancement is intended to directly displace competitors in a highly promotional home furnishings landscape.

Multi-pronged Asset Monetization and Capital Efficiency Actions to Reduce Leverage

At the start of fiscal 2025, RH reported significant debt, almost entirely resulting from $2.2 billion in share repurchases, but owns a unique real estate portfolio valued at approximately $500 million as of the beginning of the fiscal year, including joint ventures like over 30 properties in Aspen; this asset base is being positioned for opportunistic monetization via sale-leasebacks and direct sales, with management targeting $200 million to $300 million in excess inventory to be converted to cash over the next 12 to 18 months.

"We have quite a few galleries that are opening with, some that have already opened that we own that, you know, we will do sale leasebacks on. ... we have a lot of value in Aspen. We have a lot of value in multiple sale leasebacks. We still own some other properties. ... So we have a lot of flexibility. Yeah. It is not the easiest time to be, you know, real estate development business, you know, with interest rates where they are. But you know, you do not get it all right. ... But then again, you know, when we you know, look back at the assets we have and we can monetize and look at the momentum of the business that we have, we look at the cash flow potential of business. When you think about cycling this you know, this time that we, you know, we spent a lot of capital and it is expensive to build today. ... by next year, you know, that capital kind of gets behind us. And, you know, start throwing a lot of great cash flow up."
— Gary Friedman, Chairman and CEO

This diversified approach to unlocking embedded asset value and improving capital intensity is designed to fund growth and deleverage the balance sheet despite high prevailing interest rates.

Looking Ahead

Management reaffirmed its guidance, projecting revenue growth of 10%-13%, adjusted operating margin of 14%-15% for FY2025, adjusted EBITDA margin of 20%-21% for FY2025, and free cash flow generation of $250 million-$350 million, all assuming current tariffs remain unchanged. Q2 guidance anticipates revenue growth of 8%-10% and adjusted EBITDA margin between 20.5%-21.5%, with management noting that approximately six percentage points of Q2 revenue will be deferred but are expected to be recovered in the back half. The rollout of the new brand extension was postponed to spring 2026 due to tariff-driven uncertainty; the launch was originally planned for the second half of the fiscal year, but the global gallery opening schedule and multiyear capital expenditure reductions remain on course.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy.

The market has been swinging wildly in the aftermath of President Trump's "Liberation Day" tariffs announcement. Investors are struggling to predict the consequences of a such a combative trade policy.

While many stocks have been moving in line with the market's ups and downs, others have remained fairly steady. Then, there are the stocks that have been completely crushed, including former Warren Buffett stock RH (NYSE: RH). Buffett sold his entire position in the company back in Q1 2023, but since that quarter, the luxury home furnishings retailer managed to rise over 80% to trade around $450 per share earlier this year.

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Following weeks of steady declines and a 40% one-day loss on April 3, the stock trades below $150 as of this writing.

In need of restoration

RH stock peaked in 2021 during the pandemic, but higher interest rates and a weak housing market have taken their toll on the company. Despite serving an upscale and resilient clientele, slow home sales have affected its business.

CEO Gary Friedman has remained firm in his approach to stay premium and curtail promotional activity, which could water down the company's brand. He sees that as a short-term strategy to boost sales that could weaken margins and otherwise have negative long-term repercussions for the business.

The situation looks like it's turning around, even though the housing market is still in the doldrums. Comparable revenue increased 18% year over year in the fiscal 2024 fourth quarter (ended Feb. 1), and demand, which measures the value of all orders placed by customers that are not yet recognized as revenue, was up 17%. Adjusted earnings per share (EPS) more than doubled to $1.58 last quarter, though that figure still missed the Wall Street consensus of $1.91 by a wide margin.

RH happened to report earnings after the market close on April 2, the same day Trump announced the new tariffs that sent the markets tumbling. The combined news resulted in a brutal sell-off for the stock last week.

Positioned for growth

Despite the recent headwinds, RH is still a growing and profitable venture, and it's setting itself up for greater success. Besides its stores, RH has expanded into hospitality ventures, including guesthouses and restaurants, to become a luxury lifestyle brand.

RH is planning to open seven new design galleries globally in 2025, with five in the U.S., one in Montreal, and one in Paris. It's also planning four other new galleries: two focused on outdoor furniture and two on its "new concept." It has stores planned for 2026 in London and Milan.

Though no one knows when the real estate market will bounce back, the company continues to position itself for a strong recovery. Even in this challenging environment, management expects to report 10% to 13% revenue growth in fiscal 2025, plus higher margins and positive free cash flow.

An opportunity to buy the dip

RH stock trades at a forward, one-year price-to-earnings (P/E) ratio of only 14.5 as of this writing. That's a bargain, but there's a lot of risk for RH right now.

If you have a long time horizon and can look past the recent volatility, this could be an attractive entry point for patient investors, especially since RH stock is down 78% from its all-time high.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy.