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2 Dirt Cheap Stocks That Could Skyrocket

By Rich Duprey – Aug 21, 2021 at 1:09PM

Key Points

  • Look for deeply discounted stocks whose growth story remains intact.
  • It's always a good time to invest in great businesses.

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Forget meme stocks -- this pair of beaten-down stocks appear ready to shoot to the moon.

The stock market is taking a breather after its barn-burner performance over the last 17 months. Having effectively doubled in value since the low point it hit in March 2020, the S&P 500 has routinely set new record highs over this period.

Although a rising tide tends to lift all boats, it's not universal, and there are plenty of discounted stocks still available for the taking. Whether because of some one-off event or concern over macroeconomic or geopolitical possibilities, the following two stocks are letting investors buy their shares at dirt cheap prices considering their future potential.

Person sifting a handful of dirt.

Image source: Getty Images.

JD.com

There are two concerns surrounding China's second-largest e-commerce platform, JD.com (JD -5.32%): China's slowing economy and a regulatory crackdown on tech stocks and their CEOs by Beijing.

Online sales in China rose 4.4% in July, which was far lower than expected and largely due to the June 618 sales event pulling sales forward. A sister promotion to the annual 11-11 shopping extravaganza Alibaba (BABA -3.82%) launched several years ago, the June event generated $136.5 billion in sales between Alibaba and JD. For perspective, Amazon.com's Prime Day in June is estimated to have generated less than $12 billion in sales. 

China is also cracking down on tech companies and is considering limiting CEO pay. There's a constant clash between capitalist businesses operating in a communist country that has sometimes resulted in some harsh backlash. Last year, for example, Alibaba's Jack Ma had to lay low for months after his Ant Financial was forced to withdraw its IPO following his criticism of regulators.

Yet JD.com is still a strong, growing business that has expanded beyond just online retailing. It also has its finger in advertising and cloud services, and recently spun off both its healthcare business and its logistics operations.

Down 43% from their 52-week high, shares of JD.com are near their 52-week lows. The stock trades for just a fraction of its sales, and with analysts setting a consensus price target north of $103 per share, it implies there is 66% upside in the e-commerce giant's stock.

Person stretched out on large bean bag chair.

Image source: Lovesac.

Lovesac

Analysts are looking for Lovesac (LOVE 0.82%) to nearly double in price over the next year, setting a $100-per-share consensus price target on the modular furniture maker. There's good reason to believe it's not some pie-in-the-sky number, either.

Lovesac is a fast-growing company that was even able to grow during the pandemic. First-quarter sales soared 52% from the year-ago figure. If you think that's because last year's sales were depressed by the coronavirus outbreak, well, the prior-year period's sales were 33% higher than in 2019. Full-year fiscal 2021 sales ended up 37% from 2019.

That's because Lovesac's roots are as an e-commerce business, and 47% of its $320 million in annual sales last year were made online. E-commerce businesses are thriving in the coronavirus-based business landscape and Lovesac is a great example of that effect. Revenue is forecast to rise 66% over the next two years.

It's also a profitable company, both on an adjusted basis and under GAAP. Wall Street sees those profits almost tripling this year and doubling the year after, with long-term earnings growth of 30% annually.

The stock is down 43% from its recent high in June. Lovesac looks like a stock that will post more than a few earnings surprises in the quarters ahead and should see its shares soar to catch up.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, and JD.com. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

JD.com Stock Quote
JD.com
JD
$49.48 (-5.32%) $-2.78
Amazon Stock Quote
Amazon
AMZN
$93.41 (-0.77%) $0.72
Alibaba Group Holding Ltd. Stock Quote
Alibaba Group Holding Ltd.
BABA
$75.50 (-3.82%) $-3.00
The Lovesac Company Stock Quote
The Lovesac Company
LOVE
$25.93 (0.82%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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