Most of the time the market gets it right. In other words, investors and analysts alike usually price a stock appropriately based on the underlying company's potential and prospects. You just have to allow for a bit of predictable volatility.
Every now and then though, Wall Street, as well as Main Street, misses the mark. That is to say, the market lets a stock linger at a price that underestimates its upside. Here's a closer look at three such names right now that I'd consider adding to a portfolio before the market unwinds the discount.
Image source: Getty Images.
1. Dutch Bros
It's been a tough year for Dutch Bros (BROS -1.00%) shareholders. The stock soared between last October and February 2025, fueled by bullish hopes following a fantastic fiscal third quarter 2024, when revenue jumped 28% year over year. But the up-and-coming chain of coffee kiosks just wasn't able to recreate that magic. The stock's more than 40% below February's peak, weighed down by the reality of its expansion plans.
Those realities are cost and time. Although the company recently upped its long-term target store count from 4,000 to more than 7,000 (versus a little more than 1,000 right now) investors aren't exactly thrilled with the way spending is taking a toll on the bottom line, and the minimal impact it's making on revenue growth right now.
Just take a step back and look at the bigger picture. Sure, the company could spend less and boast a bigger, better bottom line. This is arguably the time to be aggressive, though. Rival Starbucks is on the ropes for reasons ranging from labor headaches to shifts in consumer preferences to brand fatigue to sheer saturation. Dutch Bros has a chance to steal market share. However, it will want to do so quickly before Starbucks regroups and counters its younger competitor's growth. It may be costly for Dutch Bros, but it will arguably be worth the short-term frustration in the long run.
In fact, it may not even take a long time for Dutch Bros' long-term upside to begin being reflected in its share price. Despite this year's persistent weakness, the vast majority of the analyst community still suggests the company's stock is a strong buy, maintaining a 12-month consensus price target of $81.59 that's more than 50% above the stock's current price.
2. DraftKings
DraftKings (DKNG -0.89%) is primarily an online sports-betting platform. Although its roots are in fantasy sports (which it still does), since the U.S Supreme Court lifted the ban on sports wagering back in 2018, this company's chief profit center has become sports betting in states where offering the service via a mobile app is possible.
In Q2 of this year, DraftKings' sportsbook handle grew 8.7% to just under $1 billion. It's inched into the online casino business as well, with Q2's casino revenue improving 23% to reach $430 million. Both extend long-lived growth streaks driven by a combination of a growing number of states that permit such online wagering as well as the continued development of established markets.
This pace of growth hasn't proved all that convincing to most investors of late. After soaring during and because of the COVID-19 pandemic and then peeling back as the lockdown efforts wound down, the 2023 bounce-back waned at the beginning of 2024. The stock's been stuck there ever since. Investors are concerned that the company may be running out of states to set up shop, while at the same time faces improving competition including unlikely betting sites like Kalshi. And to be fair, these are legitimate concerns.
These concerns look past a couple of important bullish details about DraftKings, however.
First, while it's true there is a structural limit to how much business DraftKings can do, it's nowhere near there. As of the latest look, Legal Sports Report says only 30 U.S. states plus Washington, D.C., and Puerto Rico allow online sports wagering, with California and Texas notably missing from this list. We've also seen that it can take several years to fully cultivate a market once this company begins operations in a particular state. It's possible DraftKings still hasn't reached its maximum revenue potential even in the states where it's offered sports-based betting the longest.
The other bullish detail to consider is simply that DraftKings owns one of the premier names -- if not the premier name -- in the business, whether you're talking about wagering, fantasy sports, or licensing partnerships with professional sports teams, casinos, and even media companies. For instance, DraftKings recently entered an advertising relationship with NBCUniversal's sports arm, showcasing all the ways its brand name can be monetized.
3. Snap
Finally, add Snap (SNAP -1.96%) to your list of stocks worth a look while Wall Street's seemingly forgotten about them. This one's down 90% from its 2021 peak as well as more than 15% under analysts' consensus price target of $9.21, seemingly stuck in neutral since the middle of 2022.
It's not too tough to figure out the disinterest. Between Meta Platforms' Facebook, Instagram, and WhatsApp, plus X (formerly Twitter), TikTok, and a slew of others, the last thing the world needs it yet another social networking site.
And yet, Snapchat's parent is clearly doing something right. Revenue through the first half of this year is up a little more than 11%, extending growth that was rekindled in 2023 at a pace that's expected to last at least through next year on the heels of healthy -- even if not thrilling -- user growth.
What gives?
As it turns out, perhaps another social media site is exactly what the world needs after all, although it might be more accurate to say it needs a different kind of social networking platform.
Whereas X and Facebook remain relatively toxic to the point of being unenjoyable, Snapchat users remain rather well shielded from posts and people they're looking to avoid. That's because there is no "news feed" featured at the center of users' interface. Rather, Snapchat users generally only see and engage with approved friends. The company even recently highlighted a research study suggesting "[in contrast to other platforms], a higher number of hours on Snapchat was not found to be significantly associated with any of the mental health symptoms examined."
This doesn't mean to look for a sudden rush of new users from Facebook or TikTok, or another other social networking site. If there's been no surge yet, there's not going to be one. Instead, look for a measured, persistent flow of new users who have grown weary of other social media platforms. Advertisers, of course, will follow this crowd, particularly now that it offers such specific tools like the App Power Pack, intended to spur downloads of an advertiser's app.
