Is It Time to Buy September's Worst-Performing Nasdaq Stocks?

September has historically been the worst month of the year for the stock market with the S&P 500 falling on average during the month.

However, this September bucked that trend with all three indexes posting positive gains. The Dow Jones Industrial Average and S&P 500 even hit all-time highs last month.

Data by YCharts.

As you can see, the Nasdaq Composite was the best-performing major index, rallying toward the end of the month after the Federal Reserve said it would lower interest rates by 50 basis points.

Looking at underperforming stocks can be one way to find future winners, especially if they've only sold off due to short-term pressures. On that note, let's take a look at the worst stocks in the Nasdaq-100 last month to see if any of the index's biggest companies are worth buying.

Image source: Getty Images.

1. Dollar Tree (down 16.8%)

Dollar Tree (NASDAQ: DLTR) was the worst performer in the Nasdaq-100 for September, and there's one simple reason why. The stock plunged following its second-quarter earnings report as it badly missed bottom-line estimates, trending with its peer Dollar General, which similarly tumbled on earnings.

Dollar Tree, which also owns Family Dollar, reported comparable sales growth of 0.7% in the quarter but missed profit estimates and slashed its earnings-per-share guidance for the year.

Increasing legal expenses weighed on its bottom-line results, though its underlying operating performance was also wanting as adjusted operating income fell 24.2% year over year to $218.1 million.

Dollar Tree dialed down its full-year adjusted earnings per share (EPS) outlook from $6.50 to $7.00 to a range of $5.20 to $5.60. Based on the new guidance, the stock now trades at a forward price-to-earnings (P/E) ratio of 13. Dollar Tree's problems look more temporary than permanent. The company has announced a strategic review of its struggling Family Dollar segment, and an eventual sale or spin-off of the brand could be exactly what Dollar Tree needs to get back on track. Under these circumstances, bargain hunters should consider taking advantage of the sell-off and its attractive valuation.

2. Zscaler (down 14.5%)

Zscaler (NASDAQ: ZS), the cloud-based cybersecurity software company, also tumbled last month as a result of coming up short in its earnings report.

While the company's fiscal 2024 fourth quarter earnings beat estimates, guidance for fiscal 2025 was disappointing and well below analyst expectations due to slower billings growth expected in the first half of the year.

The question for investors is whether Zscaler can top those expectations as the company has a history of providing conservative guidance and then beating it.

Revenue last quarter rose 30% year over year, showing its growth rate remains solid. Based on Zscaler's forecast for fiscal 2025, the stock trades at a forward price-to-sales ratio of 10, a high but not unusual valuation for a stock growing at this pace.

The market for cybersecurity software is expected to continue to grow, making the dip in Zscaler an intriguing opportunity. Looking past the weak short-term guidance, it's easy to see the stock recovering over the long term if the company can sustain its growth.

3. GlobalFoundries (down 13.8%)

Finally, chip stocks have been soaring, but GlobalFoundries (NASDAQ: GFS), a contract manufacturer of semiconductors, fell last month.

Unlike the two companies above, there was no particular news driving GlobalFoundries lower. Instead, a broader sell-off in chip stocks weighed on its performance as investors responded to news that Nvidia was being investigated by the Department of Justice on antitrust grounds.

As a manufacturer, GlobalFoundries' fortunes are tied to the broader strength of the semiconductor industry so it's not surprising to see it pull back in response to industry-wide concerns of an economic downturn and falling demand.

Revenue fell in the company's most recent quarter, down 12% year over year, a sign of how it's struggling to capitalize on the surge happening in other parts of the chip sector. Given that performance, investors seem better off staying on the sidelines for now with GlobalFoundries.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Zscaler. The Motley Fool has a disclosure policy.