.The stock market has been on a tear this year, driven by the excitement over artificial intelligence and its applications. But while everyone is chasing the next big thing, many investors are missing out on some hidden gems trading at bargain prices. The recent hype has overshadowed many solid businesses, and they receive little attention from Wall Street. Plus, the stocks of such businesses are at depressed prices after the selloffs in 2021-22, with many such stocks trading in a sideways fashion.
I believe buying into these under-the-radar stocks that are trading at trough levels carries significant upside potential with little downside risk. Indeed, it is a much better idea than buying into stocks currently at peak hype and at relatively high risk of a correction.
Moreover, the economic outlook is also favorable for these underappreciated stocks. Inflation has been falling steadily, easing the pressure on consumers and businesses, while the market is also expecting the Federal Reserve to pause its hikes. And let’s not forget the robust labor market, either.
With all that in mind, let’s discuss three millionaire-maker stocks that’ll come out of the storm stronger.
Luminar Technologies (LAZR)
Luminar Technologies (NASDAQ:LAZR) is the leading player in the LiDAR (Light Detection and Ranging) industry, which is a key technology for self-driving cars. LiDAR uses lasers to measure distances, creating 3D maps of the car’s surroundings, thus enabling cars to see and navigate safely. This tech is better than radar and is indeed very promising, but with a caveat. We’ll get into that later.
For starters, this stock has been battered due to Wall Street’s pursuit of profitability and the rotation out of high-growth startups. Accordingly, LAZR stock has plunged more than 80% from its peak in Feb. 2021 and has been trading sideways since the start of the year.
I believe a breakout to the upside is overdue here since the company has steadily improved its fundamentals. The company is forecasting triple-digit revenue growth through 2027, and expects to achieve positive EBITDA by 2025. It has also secured partnerships with major automakers such as Nissan (OTCMKTS:NSANY), Volvo (OTCMKTS:VLVLY), Daimler (OTCMKTS:DDAIF), SAIC Motor, and Mobileye (NASDAQ:MBLY). Of course, it does trade at a premium, but it is not enough to justify its future prospects.
As I mentioned before, LiDAR technology has a clear advantage over other sensors, such as cameras and radars, regarding accuracy, reliability, and performance. The only reason most EV companies still choose radar is because there’s a price caveat. The relatively high cost of this technology has been a barrier to mass adoption. However, as production scales and LiDAR companies fine-tune this technology, it is rapidly becoming cheaper. I believe the LiDAR will soon be worth its price, and this downside will no longer be a factor.
CarParts.Com (PRTS)
CarParts.Com (NASDAQ:PRTS) is also in the auto business, but benefits from a different trend in this industry. The company offers a wide range of auto parts for various makes and models of cars, trucks, SUVs, and motorcycles. Additionally, the company provides an online community where customers can share their experiences and get expert advice.
PRTS stock has dropped by almost 80% from its peak and is now trading around $4.65 per share. The stock has been under pressure mostly due to supply chain disruptions and freight costs, but these challenges are temporary and should not overshadow the company’s long-term potential.
I’m very bullish about the vehicle parts market due to the aging civilian vehicle fleet in the U.S., and consumers’ disinterest in buying new cars due to the high costs associated with such purchases. According to a report by S&P Global Mobility, the average age of light vehicles in the U.S. reached a record high of 12.5 years. This will translate into a boost in demand for car parts, and analysts expect CarParts’ sales growth to continue gaining momentum through 2025, where revenue growth is expected to hit 12% year-over-year.
Thus, snapping up PRTS stock while it trades at a depressed price is a great idea before the tailwinds translate into higher share prices. The consensus price target with this stock suggests upside potential of almost 100%.
Lovesac (LOVE)
Moving away from the auto industry, furniture retailer Lovesac (NASDAQ:LOVE) is another business that has been overlooked by the market and trades at a bargain multiple of 14-times forward earnings. This valuation is notable, as it exists despite accelerating sales growth projections.
The stock has fallen more than 70% from its peak due to the general weakness in the consumer discretionary sector, and some concerns about the impact of inflation and supply chain issues on its margins.
But again, these concerns are overblown, and I see a unique value proposition here that should appeal to all investors. The company has been growing its sales rapidly, driven by strong demand for its products, especially during the pandemic when people spent more time at home. Lovesac’s 3-year revenue growth rate is 35.6%, better than 95% of its peers. I do admit that this sales growth has fallen below double digits as of the April quarter, but I do think the company’s growth is posed to bounce back.
I’m not the only one who thinks this way. Analysts project sales growth will continue accelerating to 16.3% through FY2026, which makes its current valuation very compelling. Lovesac has also been improving its profitability, and strong earnings per share growth is expected for the next two years. If the price were to stay the same until FY2026, you’d be looking at LOVE trading at a forward price-earnings ratio of 6-times, which isn’t expensive by any stretch. Notably, the consensus analyst price target anticipates 112% upside for LOVE stock.
On the date of publication, Omor Ibne Ehsan 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.
