What do you do when a stock’s price plunges? The instinct to sell immediately and cut your losses is understandable – but it’s not always the smartest approach. Stock investing is a long-term commitment; as Warren Buffett wisely noted, if you’re not willing to hold a stock for ten years, you shouldn’t even hold it for ten minutes.
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Stock prices typically fall for a reason. Factors like disappointing earnings, intense competition, excessive corporate debt, regulatory setbacks, or investigations can all weigh heavily on a company’s value. The real challenge is identifying the stocks with the potential to bounce back. A price decline could represent a buying opportunity rather than a warning – if you can identify the signs of a recovery.
Wall Street’s analysts are on that job, analyzing stocks and publishing the results – and they’re not shy about checking under the hood on beaten-down shares. We’ve used the TipRanks platform to look up the details on two such stocks, shares that are flirting with rock-bottom prices but are also getting ‘Buy’ recommendations from some of the experts. Let’s take a closer look.
UTZ Brands (UTZ)
We can start in the kitchen, where UTZ Brands is a familiar label in many pantries, and has a nationwide network of production and distribution facilities. The company produces and distributes a wide range of snack foods, mainly salty rather than sweet. UTZ product lines include pretzels, potato chips, cheese balls, snack mixes, and popcorn, and are popular choices in grocery store snack aisles, convenience stores, and vending machines.
The company got its start in 1921, in Hanover, Pennsylvania, and today is a billion-dollar-plus company that has grown out of its roots in the eastern US. UTZ has expanded through both organic growth and acquisition, and owns such brand names as Bachman, Zapp’s, and TGI Friday’s Snacks.
While UTZ holds a strong position in the snack food niche, we should note that the company’s stock is down 22% over the past two months, and that UTZ shares are trading near their 52-week low. The company faces headwinds in a difficult environment for consumer goods – even though the rate of inflation is down from the high point it reached in 2022, prices remain elevated which puts pressure on consumers’ disposable income.
UTZ moved to combat that tough market dynamic by lowering its sales expectations prior to its last quarterly release (which covered 3Q24) and then by beating that lowered bar. In the 3Q24 report, UTZ showed us a top line of $365.5 million. While this was down 1.7% year-over-year, it did beat the forecast by $1.21 million. At the bottom line, UTZ’s non-GAAP quarterly EPS came to 21 cents, beating the forecast by a penny. The company reaffirmed its outlook for 2024 full-year sales growth, saying it expects to see sales increase by 2% to 2.5% year-over-year.
Covering UTZ for Piper Sandler, analyst Michael Lavery believes that the company has a sound position at the start of a new year. He writes of UTZ, “Set-up for 2025 looks good. UTZ expects improving volume-driven organic growth momentum, and expects its Kings Mountain facility to add incremental capacity in 2025 to grow its kettle business… We believe UTZ is well-positioned to achieve or beat its 3-year objectives, driven by top-line gains and margin upside. We also expect a more rational promotional environment in 2025, and UTZ remains disciplined on its price-gaps with little interest in ‘renting volume’.”
Based on this position, Lavery rates UTZ stock as Overweight (i.e., Buy), and puts a $20 price target on the shares to suggest a one-year gain of 48%. (To watch Lavery’s track record, click here)
This upbeat view is in line with the consensus view on this snack giant. UTZ has 7 recent analyst reviews on record, with a split of 6 Buys to 1 Hold supporting a Strong Buy consensus rating. The shares are priced at $13.53 and their average price target matches the $20 set by Piper Sandler. (See UTZ stock forecast)
Forestar Group (FOR)
The next stock on our list is a change of pace, a land development company. Forestar is one of the largest residential lot developers working in the US, and while its stock has been publicly traded since 2007, the company is majority-owned by D.R. Horton, one of the nation’s largest homebuilders. The company operates in 62 real estate markets across 24 states.
Forestar’s activities include both land acquisition and development. The company purchases unused land tracts and makes the initial developments necessary for individual plots to be built up for residential use. In short, Forestar builds communities.
This niche makes Forestar vulnerable to the vagaries of the real estate and mortgage markets – which means that the combination of elevated inflation and high interest rates over the past few years, with consequent pressure on home prices and mortgage sales, has created a strong headwind for the company. In the last reported quarter, fiscal 1Q25, which ended this past December 31, Forestar saw revenues fall year-over-year and missed on both total sales and earnings. Shares in the company have fallen by 24% over the past two months.
In the fiscal first quarter, Forestar reported $250.4 million in total revenue, a figure that was down 18% year-over-year and missed expectations by $78.39 million. The company’s earnings, at 32 cents per share, were 34 cents per share lower than had been anticipated. Forestar cited a drop in lot sales that drove down revenues.
Lot sales in fiscal Q1 came to 2,333, generating the company’s revenue. For the fiscal year 2024, Forestar sold a total of 15,068 lots and finished calendar year 2024 with control and ownership of 106,000 lots. We should note here that the company typically sees revenues and earnings both fall off from fiscal Q4 to fiscal Q1, a fact that is linked to homebuyer patterns. Buyers prefer to buy in late summer and take residence in early autumn, coinciding with the start of the school year. This makes fiscal Q4 Forestar’s strongest quarter of the year, by a wide margin.
For BTIG analyst Carl Reichardt, the drop in share price here gives investors an opportunity to buy in at a bargain. He notes that Forestar has a leading role in its niche, which is not fully appreciated by investors, and he writes of the company, “It seems clear the credit world sees value in FOR’s business model and assets many in the equity markets do not: FOR shares now trade at under 80% of book despite our 13% NTM ROE forecast. FOR remains the largest pure-play company in the nation controlling the most necessary raw material in the homebuilding value chain. The long-term picture at FOR remains intact in our view: we see a significant opportunity for FOR to gain market share in this fragmented and undercapitalized, yet critical, segment of the housing ecosystem…”
Reichardt goes on to put a Buy rating on FOR stock, and he complements that with a $40 price target, showing his confidence in a 66% upside for the next 12 months. (To watch Reichardt’s track record, click here)
There are only 3 recent analyst reviews here, but they split 2 to 1 in favor of Buy over Hold, giving the stock its Moderate Buy consensus rating. FOR is currently selling for $24.10 and has an average price target of $38.67, implying a 60.5% gain lies ahead for the stock. (See FOR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
