Contrarian Calling: 3 Undervalued Stocks Poised to Breakout by June
The looming threat of a recession is no joke. With the Federal Reserve attempting a soft landing, riskier bets like speculative stocks and high flyers tend to be the first to fall off the cliff. Careful investors can concentrate on defense and look for less risky places to park their cash positions, like undervalued stocks with Buy recommendations. This gives a lot of room for growth when the market bounces back up if a soft landing does occur—or they can be an excellent contrarian play.
Based on analysts’ high price targets, this article will look at bargain stocks with a significant potential upside of at least 50%.
ADT Inc. (ADT)
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When it comes to smart home and small business security, ADT Inc. (NYSE:ADT) is one of the top choices of consumers. The company offers innovative and sustainable solutions for people, homes and small businesses under its two main segments: the solar segment for the sale and installation of solar systems and services to residential clients; and the CSB (consumer and small business) segment for its integrated security and automation systems.
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ADT’s latest quarter ended at an $86 million net loss, significantly improving from the $161 million loss in the year-ago quarter. Recurring monthly revenue (RMR) saw a 3% increase to $350 million for the quarter, and EPS came in at a 250% surprise. The company also received a corporate ratings upgrade from Moody’s, highlighting its strong capacity to pay off its debt.
ADT also continues to provide excellent shareholder value, having recently increased dividends by 57% and initiated a $350 million share buyback program. The most significant selling point is its $10 estimated high price within the next 12 months. ADT’s improving financials, positive analyst expectations and great shareholder value make it one of the more attractive undervalued stocks in the market right now.
DXP Enterprises (DXPE)
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A leader in pump solutions and rotating equipment products, DXP Enterprises (NASDAQ:DXPE) is a product and service distributor to industrial customers. It operates under two main segments: the service center segment for its technical expertise, logistics capabilities, MRO products, equipment and services, while the innovative pumping solutions segment offers custom pump skid packages, pump remanufacturing and private label & branded pump manufacturing.
The company recently announced the completion of its acquisition of Kappe Associates to help strengthen its position in the water and wastewater treatment market.
DXPE’s third quarter pointed to excellent results, with sales increasing 8.2% YoY. Gross profit and net income also saw some growth. Meanwhile, diluted EPS rose to $0.93, representing a 31% increase YoY, and adjusted EBITDA came in at $44.0 million — 28.3% higher YoY. The company has also successfully reduced its borrowing costs and raised an additional $125 million post-Q3, helping its financial flexibility.
Analysts project upside of more than 60% in the next 12 months with a high target of $55.00. DXPE’s diversified offerings, solid YoY financial growth, huge upside and strategic efforts to ensure its financial flexibility make it one of the top undervalued stocks we see breaking out soon.
United Airlines Holdings (UAL)
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If you are a frequent flyer, you know United Airlines Holdings (NASDAQ:UAL). The holding company owns United Airlines, Inc., which operates in various destinations in North America, Europe, the Pacific, the Middle East, Latin America and Africa. The company recently announced a $2.6 billion terminal renovation project in Houston, which expands 40 gates at Terminal B at George Bush Intercontinental Airport to accommodate larger aircraft and increase the airline capacity during peak travel dates by 40%.
The company’s latest quarterly report included some encouraging news. Total operating revenue grew 9.9% YoY to $13.63 billion. Adjusted diluted EPS came in at $2.00, well ahead of expectations. “Our plans really came together in 2023, and I want to thank the United team for all of the hard work it took to get us there,” said Scott Kirby, United Airlines CEO.
The company also ordered 110 additional aircraft beginning in 2028 — another United Next growth strategy milestone. Analysts project a potential upside of more than 120% in the next 12 months with its high target price of $98.00. With its ongoing growth initiatives, a strong foothold in the travel sector and an optimistic fair value estimate from analysts, there’s no denying that UAL offers a compelling choice as one of the best-undervalued stocks in the market.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.
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