2 Struggling Stocks to Buy at a Discount

The stock market has maintained its upward trend so far in 2024, even as the momentum has slowed recently. The S&P 500 Index ($SPX) and the tech-centric Nasdaq-100 Index ($IUXX) have gained 6.8% and 7.6%, respectively, year-to-date. This growth reflects economic optimism as fears of recession have waned, and investors display ongoing enthusiasm for artificial intelligence (AI) technology. What stands out in particular is the resilience of the equity market and the broader economy in the face of prolonged high interest rates.

Despite the overall positive investor sentiment, not all stocks have gained ground this year. Some stocks and sectors are facing challenges, and are trading at notable discounts. However, this decline in the value of fundamentally strong stocks presents an opportunity for investors to capitalize on the future recovery.

Considering these factors, Lululemon Athletica (LULU) and Rivian Automotive (RIVN) are two struggling stocks to buy at a discount. Let's explore the catalysts that could power these stocks higher.

Lululemon Athletica

Lululemon Athletica (LULU) is a leading provider of athletic apparel, footwear, and accessories. Its stock is down about 33% year-to-date, reflecting the challenging business environment in the U.S., its core market. Further, the heightened competitive environment remains a drag. 

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Despite softness in the core market, the company continues to invest in growth measures, while management remains optimistic about opportunities to gain market share in 2024, which bodes well for recovery in Lululemon stock. 

It’s worth highlighting that Lululemon’s store productivity remains high, surpassing industry averages in sales per square foot. Additionally, its stores enhance its brand visibility and attract new customers. Consequently, with the planned expansion and optimization of stores in 2024 and beyond, Lululemon is poised to solidify its foothold in the U.S. market.

Besides store growth, Lululemon will likely gain from product innovation, brand-building efforts, and omnichannel offerings. The company’s focus on emerging trends and new product introductions enables it to remain relevant and competitive across categories. The expansion into the footwear segment, catering to both women and men, and a promising pipeline of products position it well to generate increased sales in the U.S. and the international market. 

It's worth noting that Lululemon is seeing solid growth in the international markets. Looking ahead, Lululemon is focusing on opening new stores and global branding initiatives, which will enable it to target new markets and diversify its revenue streams in the long run.

While Lululemon is poised to deliver solid growth in the long term, near-term challenges in the U.S. market might be keeping a few analysts from endorsing its stock. 

Among the 26 analysts covering LULU, 17 have “Strong Buy” ratings, three recommend “Moderate Buy,” four have a “Hold,” one suggests “Moderate Sell,” and one has a “Strong Sell” recommendation. Moreover, the average price target is $480.85, indicating an upside potential of approximately 41.7% from current levels.  

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Rivian Automotive

Rivian (RIVN) is an electric vehicle (EV) startup poised to benefit from the shift toward the electrification of vehicles. However, its stock is down about 63% year-to-date, reflecting a slowdown in EV demand due to high interest rates and competitive headwinds.

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While Rivian faces near-term demand uncertainties, it focuses on driving cost efficiency and optimizing its production and deliveries. Moreover, the company is investing in technological advancements to elevate the customer experience, while maintaining a solid balance sheet

Rivian's focus on ramping production is expected to yield higher cost efficiency. Notably, the company doubled its production and deliveries in 2023, which significantly improved gross profit per vehicle in the fourth quarter. 

Looking forward to 2024, Rivian anticipates further improvements in organizational efficiency. Management plans to implement additional cost-saving measures through new design engineering changes in the R1 platform to reduce material costs and optimize manufacturing expenses. These initiatives position Rivian to achieve a modest gross profit in the fourth quarter of 2024.

Rivian recently guided for annual production of 57,000 vehicles, and aims to achieve delivery targets through new model launches and production efficiencies. The company expects deliveries to be supported by existing backlogs and new orders. Rivian's efforts to enhance brand awareness, expand retail locations, and establish service centers will likely bolster deliveries. Furthermore, the expansion of its product lineup at competitive price points bodes well for future growth.

Among the 24 analysts covering RIVN, 11 have “Strong Buy” ratings, two recommend “Moderate Buy,” nine have a “Hold,” and two suggest “Strong Sell.” The average price target is $18.57, which indicates an upside potential of approximately 113% from current levels.  

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On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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