There’s no shortage of uncertainty in the stock market these days.
Investors have been left scratching their heads after President Trump announced global tariffs on April 2, then put the “reciprocal” tariffs with most of the world on pause for 90 days, stepped up a trade war with China, and has since flip-flopped on duties on tariffs on electronics while saying he may pull back tariffs on autos.
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As a result, the S&P 500 (SNPINDEX: ^GSPC) is now in a correction, defined as a decline of at least 10% from a recent peak. While investors may be nervous about the trade war and the increasing risk of a recession, long-term investors know that sell-offs represent buying opportunities as quality businesses just got cheaper.
On that note, let’s take a look at two beaten-down stocks that could double over the next two years.
Investors can’t run away from Target (NYSE: TGT) fast enough, it seems. Shares of the venerable retailer are now down 65% from their peak during the pandemic, and it’s understandable why.
Target has struggled to grow since the end of the pandemic as consumer discretionary spending has been weak, its pandemic momentum faded, and it’s been plagued by internal problems like theft. The company just capped off a year with flat comparable sales and earnings per share. Target also expects no growth in earnings per share this year, forecasting a range of $8.80 to $8.90 with flat comparable sales and revenue growth.
However, those headwinds now seem fully priced in as Target’s price-to-earnings ratio has fallen to just 10.5. At that valuation, the stock could double with no change in earnings, and it would still trade at a discount to the S&P 500.
Target’s valuation isn’t going to jump on its own, but the company has a plan to reinvigorate the brand. That includes leaning further into its owned brands like Cat & Jack, its kids’ apparel line, and All in Motion, its athleisure brand, which have delivered solid growth. It aims to regain its “Tarzhet” brand magic, or its cheap chic reputation that it seems to have gotten away from in recent years. The company also plans new store openings and remodels and expects to add at least $15 billion in sales over the next five years.
The company’s earnings are currently well below their peak a few years ago, meaning that if Target can get back to its previous health, the stock could soar. It may need some help from the macroeconomic environment to double, but if the company shows signs of improvement, the stock has a lot of upside potential.
