As the festive season kicks off, many of us will be shopping with an eye for bargains. When done right, these expenses can feel a little lighter. And the same goes for stock selection.
When it comes to stocks, bargain hunting usually means finding beaten-down stocks that remain fundamentally sound. They may be caught in a cyclical downturn — there’s a reason the stock price fell, after all — but they’re not necessarily bad portfolio options.
To uncover such opportunities, turning to Wall Street’s stock analysts can provide valuable insights. These experts recently highlighted two beaten-down stocks that could make a comeback in 2025.
Using the TipRanks database, we examined these two picks to understand why they could be poised for double-digit gains in the near future.
KinderCare Learning Companies (KLC)
The first stock on our beaten list is KinderCare, an early childhood education company that is part of the for-profit education and child development sector. The company was founded in 1969 and is currently based in Portland, Oregon; Its network of education centers spans 40 states and can serve up to 200,000 children. This network includes approximately 1,500 early childhood education centers, and is supported by approximately 900 before- and after-school program locations. The company also operates the Crème Schools line, a premium early childhood education network that provides parents and students with engaging learning environments in a variety of themed classrooms. All in all, KinderCare has programs for children from 6 weeks to 12 years.
Although KinderCare has been active in the field of early childhood education for decades, the company only went public in October this year. The KLC stock ticker hit the trading markets through an initial public offering in which the company raised $576 million in gross proceeds. The offering closed on October 10 at a price of just over $28; Since then, the stock has fallen – dropping 20% in November alone.
The drop in KLC’s share price followed rival BFAM’s earnings report, which showed a slowdown in both quarterly revenue and future prospects. Also, the recent election results impacted KinderCare’s stock, primarily due to the increased likelihood of some uncertainty given KLC’s significant exposure to government subsidies and the likelihood that the incoming Trump administration will cut federal spending. Finally, KLC’s first public earnings release came this month, and the company provided no further guidance for the fourth quarter or FY25.
Although the announcement of the profit figures did not provide much guidance, it did exceed expectations. The company reported third-quarter revenue of $671.5 million, up 7.5% year over year and about $2 million better than expected. Ultimately, KLC’s non-GAAP earnings came in at 5 cents per share, while the Street had expected a loss of 2 cents.
This stock has caught the attention of Morgan Stanley analyst Toni Kaplan, who notes that the recent decline presents a buying opportunity. She writes about this new stock: “We see the recent share price decline as an attractive entry point… KLC’s ’25 EV/EBITDA multiple is now three turns lower than where it traded post-IPO… KLC is currently trading also in 2 – is below the average multiple of BFAM and LSD/MSD Business Services peers at ’25 EV/EBITDA. We believe this step is exaggerated, because not much has actually changed with regard to the foundations of KLC.”
Kaplan then rates these stocks Overweight (i.e. Buy), an upgrade from Equal Weight. Her price target, set at $30, implies a one-year gain of 29%. (To view Kaplan’s track record, click here)
Since entering the public markets, KLC stock has received a Strong Buy consensus rating from The Street’s analysts, based on 8 ratings, including 7 Buys and 1 Hold. The shares are priced at $23.27 and their average price target of $33.50 suggests the stock will rise 44% over the next twelve months. (To see KLC stock forecast)
Roku (ROKU)
The next stock we’ll look at, Roku, is a leader in on-demand streaming television. The company was a pioneer in this space and today offers customers a subscription streaming experience that gives them the TV service they want, the way they want it. Customers can purchase smart TVs that have Roku capabilities built-in, or they can purchase a Roku player to connect to an existing TV set; either way, the streaming service is purchased through a subscription contract.
The main difference between Roku and older cable services lies in user choice. Roku doesn’t bundle packages; the company is more likely to let its customers choose what they want to watch. The Internet-based service may support voice-activated controls for searching for shows, launching apps on the service, or even adjusting the volume. Roku’s product line includes its namesake player, the company’s smart TV, audio speakers, and accessory remotes for the TV or even smart home functionality.
From the user’s perspective, Roku requires an internet connection, but then offers access to a host of streaming apps, as well as the usual TV channels or even satellite or cable channels. Roku brings the flexibility of the Internet to the TV world.
That said, shares in Roku are down this year. The stock is down just over 26% in the past year. Recent headwinds include reduced fourth-quarter revenue growth in the platform segment, with the company dropping it from 15% year-over-year to 14%. In addition, the company suggested it would stop reporting certain operating figures next year, raising some concerns that it would reduce its financial transparency. The Trade Desk also recently announcing a new streaming operating system has further dampened sentiment.
Despite the concerns, the company reported overall good results for the third quarter of 24. The company’s revenue of $1.06 billion rose more than 16% year-over-year and exceeded forecasts by $40 million. Roku posted a net loss of 6 cents per share in the quarter, but that marked a solid year-over-year turnaround from Q3 2023 net earnings per share of $2.33 – and it was 27 cents per share better than expected .
For Baird analyst Vikram Kesavabhotla, the key point in understanding Roku is threefold. Explaining his position, he writes: “Historically, we have been hesitant about the company’s execution in a rapidly evolving streaming landscape – but we now think shares are overlooking the meaningful changes in the company and the attractive long-term opportunities. Our optimism is based primarily on: 1) increasingly favorable industry trends, 2) positive developments in the strategy, and 3) encouraging early indicators in recent results. Investor expectations appear better calibrated after the third quarter – and from here we see potential upside to the estimates/valuations over time.”
These comments support Kesavabhotla’s Outperform (i.e. Buy) rating and its price target of $90 points toward a potential 33% one-year upside. (To view Kesavabhotla’s track record, click here)
There are 21 recent reviews recorded for ROKU stock, and they are broken down into 9 Buys, 10 Holds, and 2 Sells for a consensus rating of Moderate Buy. The stock is selling for $67.71 and has an average price target of $79.78, suggesting an upside of 18% over one year. (To see Roku’s 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 for informational purposes only. It is very important to do your own analysis before making an investment.
