With the S&P 500 approaching its all-time highs, finding value stocks trading at discounts can be challenging. However, by digging deeper, savvy investors can still uncover hidden opportunities. Two such undervalued stocks are Super Micro Computer (NASDAQ: SMCI) and Lyft (NASDAQ: LYFT), which are currently facing challenges but also present significant upside potential. Here’s why these two stocks could be worth considering for a $2,000 investment.
Super Micro Computer: A Server Maker Poised for Growth
Super Micro Computer, also known as Supermicro, has faced significant hurdles in recent months, with its stock plummeting nearly 70% from its March 2024 high. The company has been embroiled in allegations of revenue inflation, delayed financial filings, and a dropped audit from Ernst & Young. These issues led to a subpoena from the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), putting its future in question.
However, despite these challenges, there are reasons to believe that Supermicro’s stock could be undervalued. In the past three months, the company has taken proactive steps to resolve its issues, including appointing a new independent auditor, submitting a compliance plan to Nasdaq, and promising to file its 10-K report by February 25. If Supermicro can successfully navigate these regulatory obstacles, its stock could rebound strongly.
Supermicro is a leading provider of dedicated AI servers, and with the rise of artificial intelligence, the demand for such servers is expected to skyrocket. The company projects a revenue growth of 57% to 67% in fiscal 2025, with a potential 65% growth for fiscal 2026, reaching $40 billion. Analysts predict a 17% earnings per share (EPS) growth in fiscal 2025 and a further 54% jump in fiscal 2026.
Given this stellar growth trajectory, Supermicro’s stock, trading at just 11 times next year’s earnings, could be a bargain for those willing to take a calculated risk. While the company is not out of the woods yet, its long-term prospects are appealing, and it could offer significant returns once its regulatory issues are resolved.
Lyft: The Underdog in Ride-Hailing
While companies like Uber dominate the ride-hailing market, Lyft continues to struggle to compete. Despite this, Lyft’s stock remains undervalued, especially considering its potential for recovery and growth in a post-pandemic world. The company has taken several steps to improve its position in the market, including optimizing its ride-hailing platform, improving driver incentives, and expanding its services.
Lyft has also made moves to diversify its business model, including introducing new features such as bike and scooter rentals, as well as exploring partnerships with other transportation services. These efforts are aimed at increasing the company’s overall market share, which could boost its stock price in the long run.
Although Lyft faces stiff competition from industry giants, it has an opportunity to carve out a niche for itself, particularly if it continues to improve its service offerings and capture the growing demand for shared transportation. Investors who are willing to take a chance on the underdog may find that Lyft offers significant upside potential in the coming years.
Why You Should Consider These Stocks
Despite their challenges, both Supermicro and Lyft present unique opportunities for value investors. Supermicro, in particular, stands to benefit from the boom in AI server demand and its potential to resolve regulatory issues. Lyft, on the other hand, is an undervalued player in the competitive ride-hailing market, with the potential for growth if it can execute its recovery plans.
Investing $2,000 in these two stocks could position you for substantial returns if these companies successfully overcome their hurdles and capitalize on their respective growth opportunities. As always, investors should conduct their due diligence and be prepared for potential risks, but these two undervalued stocks might just be the hidden gems you’re looking for in 2025.
