In times of economic uncertainty, it can be wise for investors to search for undervalued stocks. While the broader market wallows in pessimism, these discounted businesses offer substantial upside when their intrinsic value is eventually recognized. In this article, I’ll highlight three such value stocks that analysts believe could double over the next 12 months.
Though their share prices languish today, each of these companies have strong underlying fundamentals and a promising growth trajectory. With the right catalysts, they could attract renewed enthusiasm from investors and analysts alike. Consequently, their stocks could surge higher as more attention turns their way.
Of course, realizing 100% returns over most time frames is no easy feat. The companies profiled here face risks and challenges like any other. However, the market may be underestimating their long-term prospects. If the stars align, these stocks could enter a breakout phase and reward shareholders handsomely.
Opera (NASDAQ:OPRA) has seen its stock price plummet over 60% from its 52-week high of $28 to the current level of around $11 per share. However, I believe now is an opportune time to take a contrarian stance and build a position in this out-of-favor web browser company.
While macroeconomic headwinds and a pullback in digital advertising spend have impacted revenue growth in the near-term, I believe the company’s long-term growth story remains intact. Opera is successfully executing its strategy of shifting its user base towards higher-value Western markets. For example, in Q2 2023, annualized average revenue per user (ARPU) increased 25% year-over-year to $1.17, while users in Western markets now represent 15% of Opera’s total user base.
In addition, the introduction of AI-powered features in Opera’s web browsers provides a key point of differentiation that should support further user growth in developed markets. User engagement has already shown positive momentum after Opera launched its AI assistant feature, with growth seen in both time spent and search queries. I believe Opera’s first mover advantage in integrating AI into web browsers positions it well to gain share in an absolutely massive market.
Furthermore, Opera has a fortress balance sheet, with $98 million in cash and no debt. Notably, the company also initiated a recurring dividend in Q2, underscoring its financial strength.
While the advertising industry faces cyclical headwinds, Opera’s pivot towards higher-value users in Western markets should allow it to emerge stronger. With the stock trading at just 2.5-times sales, despite estimated revenue growth of 15% annually for foreseeable future, I believe the stock’s current valuation offers a compelling entry point for contrarian investors with a long-term perspective. The most recent analyst rating on OPRA stock puts the one-year price target at $23 per share, implying 109% upside.
Canadian Solar (CSIQ)
Like many solar stocks, Canadian Solar (NASDAQ:CSIQ) has faced selling pressure recently, with shares down 42% over the past year. However, I believe the punishment has been excessive, and patient investors can capitalize on the discounted valuation of this high-quality renewable energy leader.
Despite the challenging environment, Canadian Solar continues executing well from an operational standpoint. In Q2 2023, the company generated record quarterly module shipments of 8.2 GW and $2.4 billion in revenue. Gross margins remained resilient at 18.6%, excluding a $31 million inventory write-down. The company also maintained its full-year shipment guidance of 30-35 GW, underscoring the demand outlook.
With major initiatives like the Inflation Reduction Act in the U.S. providing long-term support through subsidies and tax credits, the growth runway for solar energy remains robust. Canadian Solar is strengthening its position in the U.S. market by building a 5 GW module factory in Texas and securing a 7 GW supply agreement with a major renewable developer.
Meanwhile, Canadian Solar maintains a rock-solid balance sheet with $3.3 billion in cash, matching its debt load. The valuation at just 0.16-times sales offers a wide margin of safety and enormous upside potential once macro conditions improve. Given its financial strength and global leadership position, I believe CSIQ stock could double over the next 2-3 years.
The stock’s downside seems relatively contained at the current depressed valuation. Canadian Solar’s earnings per share are expected to increase from $5.20 in 2023 to $12.30 in 2031, and revenue is expected to increase from $8.8 billion to $22.6 billion in the same timeframe. Accordingly, Wall Street analysts have an average price target of $42, implying 86%-plus upside in one year. The price target is $68 on the higher end.
Terran Orbital (LLAP)
Terran Orbital (NYSE:LLAP) is an emerging player in the booming small satellite industry. While the company is currently not making much revenue, its backlog has swelled to $2.6 billion, providing clear visibility into a revenue ramp over the coming years. Terran Orbital guided for over $250 million in sales in 2023 and expects approximately 80% of its contracted backlog will convert into revenue by the end of 2025.
The company is successfully executing, delivering satellites on time for partners like Lockheed Martin (NYSE:LMT), and scaling up production capacity. Terran Orbital recently opened a new 50,000 square foot production facility that doubled its capacity to 20 satellites per month. Another larger facility opening in 2024 will boost production capacity further.
Management expects positive cash flow and improving profitability by 2024, as scale drives operating leverage. The company’s current valuation at less than 2-times 2023 guided revenue seems disconnected from Terran Orbital’s growth prospects. Yes, as a pre-revenue company, LLAP certainly carries elevated risk. But with strong execution and a massive backlog in place, I believe the risk-reward for this stock is compelling for investors comfortable with the inherent volatility of small, high-growth stocks.
While the timing of contract conversions brings uncertainty, my bull case scenario sees LLAP stock doubling by 2025. The space economy is experiencing dramatic growth, and Terran Orbital has strategically positioned itself to capitalize on this trend. Wall Street analysts have an average price target of $4.70, implying one-year upside potential of 568%.
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.