2 Stocks Down 34% and 52% to Buy Right Now

Stocks have bounced back this year on enthusiasm for artificial intelligence, falling inflation rates, and a generally resilient economy. And according to some, we’re even in a new bull market.

But not every stock has recovered, with demand for discretionary goods still lagging and other sectors struggling as well. If you’re looking to capitalize on quality stocks trading at a discount, keep reading to see two that look like great buys right now, according to this pair of Motley Fool contributors. 

This video game maker is set for explosive growth

Keith Noonan (Take-Two Interactive): The next big growth phase for Take-Two Interactive (TTWO -0.45%) is coming soon. The video game publisher is best known for its Grand Theft Auto (GTA) franchise, and it is readying the next installment in its biggest series in what is set to be an industry-defining moment. Based on comments from management in the company’s most recent quarterly call, Grand Theft Auto VI will likely be released next year. 

In its current fiscal year, Take-Two expects to post bookings between $5.45 billion and $5.55 billion. But it expects that high-profile new releases will power massive growth in the following year. Right now, management is guiding for bookings to come in at over $8 billion next fiscal year, good for growth of more than 45%. Even better, the company is guiding for the strong momentum to continue from there. 

Consider that Grand Theft Auto V was released in 2013 and went on to become the most profitable entertainment release in history. GTA V has shipped more than 185 million copies worldwide and generated billions in additional high-margin revenue through its online mode. Despite being nearly a decade old, the game has managed to keep players engaged and spending. 

Like its predecessor, GTA VI is poised to be a transformative release for Take-Two. While some images and videos of the game have already leaked, the publisher has yet to officially unveil Grand Theft Auto VI. The franchise sequel will play a key role in powering the company’s performance for at least the next five years and help power explosive earnings growth. 

With the game likely to become this decade’s highest-grossing and most profitable entertainment release, investing in Take-Two before the hype and the marketing cycle ramp-up could be very rewarding. With the company’s stock still down 34% from its high, shares stand out as a smart buy right now.

This retailer has bottomed out

Jeremy Bowman (Target): One of the most impressive stock stories in the retail sector during the pandemic was Target (TGT 0.84%), but since then it’s flamed out. Profits have fallen. The company has struggled with consumer trends, elevated inventory levels, and even theft, and now sales are falling, too.

Despite the weak numbers and guidance cut in its recent second-quarter earnings report, the stock did something surprising: It rose on the news, finishing the session up 3%. That’s a good sign that it has bottomed out, because those gains came even as it cut its full-year adjusted earnings-per-share forecast from a range of $7.75 to $8.75, to a range of $7 to $8.

The market seems to have already priced in the worst-case scenario with the stock. Target shares are now down 52% from their 2021 peak during the pandemic, but it still has the same strengths that drove its performance during the crisis, and it should return to growth as macroeconomic conditions improve.

The company is one of only a few multi-category retailers along with Walmart and Costco Wholesale, and that gives it an advantage for convenience as a one-stop shop.

Target’s geographical footprint is unmatched by any of its rivals. It has a range of store formats in rural, suburban, and urban areas. It has also leveraged its store base for same-day fulfillment, saving money by using its stores to process online orders instead of setting up distribution centers. And Target has exhibited strength with its unique house brands — 10 of which each generate annual sales of $1 billion or more. 

Even after dialing down its earnings forecast, Target still trades at a forward price-to-earnings ratio of about 17, making it cheaper than the S&P 500 and peers like Walmart and Costco. Target will eventually see demand for its discretionary products return, and when it does, the stock is likely to soar, given the shares’ discounted price, the chain’s competitive advantage, and its investments in growing the business.

Jeremy Bowman has positions in Target. Keith Noonan has positions in Take-Two Interactive Software. The Motley Fool has positions in and recommends Costco Wholesale, Take-Two Interactive Software, Target, and Walmart. The Motley Fool has a disclosure policy.

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