Stock Market Uncertainty
Currently, the stock market is fraught with uncertainty.
Investors have been left confused following President Trump’s announcement of global tariffs on April 2, his subsequent decision to pause reciprocal tariffs for 90 days, the escalation of trade tensions with China, and his contradictory statements regarding tariffs on electronics and potential reductions on auto tariffs.
Market Reactions
As a consequence, the S&P 500 (SNPINDEX: ^GSPC) has entered a correction, marked by a decline of at least 10% from its recent high. While the trade war and looming recession concerns may cause investor anxiety, seasoned investors recognize that market downturns can present lucrative buying opportunities as reputable companies become more affordable.
Potential Investment Opportunities
With that in mind, let’s examine two underperforming stocks that have the potential to double in value over the next two years.
Target’s Struggles
Investors appear to be avoiding Target (NYSE: TGT), as its shares have plummeted 65% from their pandemic peak. Target’s growth has stagnated since the pandemic’s end due to weak consumer spending, diminishing momentum, and internal issues like theft, resulting in flat comparable sales and earnings per share for the year.
Valuation and Future Plans
Target’s challenges seem to be factored into its valuation, as its price-to-earnings ratio has dropped to a mere 10.5. This means the stock could potentially double even without an increase in earnings, while still remaining below the S&P 500 average. Target plans to revitalize its brand by enhancing its owned brands and intends to open and remodel stores, aiming for an additional $15 billion in sales over five years.
Micron’s Potential Growth
Another stock that is currently undervalued is Micron (NASDAQ: MU), a leading producer of memory chips. Micron’s business is cyclical, influenced by rapid shifts in memory chip pricing, but the company is now positioned positively, particularly due to the AI boom. Recent quarterly reports show over a doubling in revenue from data centers, aligning with a 38% overall revenue increase. Micron is now closely associated with major AI player Nvidia.
Final Thoughts
While external economic factors from the trade war may impact Micron, the ongoing demand for AI technology suggests a strong trajectory for growth. Currently trading at a price-to-earnings ratio of 10, the downward pressure on Micron’s stock seems exaggerated, and hitting analyst expectations in the upcoming quarters could lead to significant stock appreciation.
