Two Affordable Shares Poised for Significant Gains in 2025
The S&P 500 has soared 69% since its 2022 low, yet some once-booming companies are still trading at rock-bottom prices. Let's examine two of these bargain-bin stocks and why they could rebound in 2025.
1. Alibaba Group
China's sluggish economy has stifled sales for Alibaba Group (BABA 7.10%), the multinational conglomerate behind popular marketplaces Taobao and Tmall. Although Alibaba continues to generate revenue from various sectors, including e-commerce, logistics, cloud computing, and entertainment, its growth slowed significantly in 2022. Fortunately, the Chinese e-commerce market is projected to surge 47% to $1.7 trillion by 2025, with the government implementing measures to boost the economy. As China's largest e-commerce and cloud services provider, Alibaba stands to benefit significantly.
Alibaba's international operations are also thriving, with revenue from international commerce growing 35% year over year in Q3 2024. Alibaba Cloud's artificial intelligence division reported triple-digit growth in the same quarter. With a strong financial profile (over $12 billion in trailing-12-month net income on $134 billion in revenue) and the stock trading at just 11 times this year's earnings estimate, investors can snag a bargain with huge potential gains in 2025 and beyond.
2. Wayfair
The U.S. housing market has struggled with rising interest rates, but as rates stabilize, activities are picking up. Wayfair (W 2.01%), the leading online home goods retailer, could be a major beneficiary of the housing market's recovery. Although demand for home goods fell in 2022, Wayfair's revenue trends are improving. In the most recent quarter, Wayfair's revenue declined only by 2%, reflecting weak housing spending.
Wayfair is also demonstrating better financial performance, returning to positive free cash flow in 2024 and focusing on core operations in the U.S., Canada, U.K., and Ireland while exiting less profitable markets. Wayfair's customer base remains strong, with over 21 million active customers. As the average order value increased by 4.4% year over year to $310 in the most recent quarter, the company seems positioned for a strong rebound in 2025.
With a price-to-sales multiple averaging 0.5 over the past two years, Wayfair offers significant upside in a growing home goods market.
- In light of the strong financial profile of Alibaba Group, with over $12 billion in trailing-12-month net income on $134 billion in revenue, some investors are seeing an opportunity for significant gains by investing in BABA, as the stock is currently trading at just 11 times this year's earnings estimate.
- Given the improving revenue trends and strong customer base at Wayfair, despite the challenges in the U.S. housing market, some analysts believe that the company's current price-to-sales multiple of 0.5, which is lower than its historical average, presents a potential buying opportunity for investors looking to capitalize on the growth potential in the home goods market.
