2 Stocks Down 63% and 36% to Buy Right Now

Investors have been treated to a wild series of swings across this year's trading. Pivots on tariff and trade policy, shifting outlooks on interest rate policies, corporate earnings of varying quality, and other factors have all combined to create a stretch of nearly unprecedented volatility for stocks.

While the broader market has enjoyed some strong rebound trading lately, there are still many stocks trading at huge discounts compared to their previous highs. If you're looking for investment plays with huge rebound potential, read on to see why two Motley Fool contributors think that taking a buy-and-hold approach to these beaten-down stocks would be a great move right now.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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Target stock: 63% off of its all-time high

Jennifer Saibil (Target): Target (NYSE: TGT) has experienced so many challenges over the past few years that it's hard to keep up. So it isn't surprising that its stock has absolutely tumbled and is now 63% off of its all-time highs. But it's an excellent buying opportunity for the smart investor.

Results have been tepid at Target recently, with sales and comparable sales roughly flat in fiscal 2024 (ended Feb. 1). But the company's 1,800+ U.S. stores continue to draw traffic from loyal customers, and there were many signs of life. Traffic was up 1.4% for the year, which means people are still coming to shop at Target, and there's strength in the digital program -- same-day services increased 25% year over year in the fourth quarter.

Full-year earnings per share were $8.86, and there's plenty of cash on the balance sheet, so there aren't any worries about Target's ability to keep operating.

Part of the problem is that unlike competing retailers Walmart and Costco Wholesale, both of which have large grocery departments, Target's core segments are discretionary items, which customers will naturally cut back on when they're trying to save money. The company is well-positioned to get back to higher growth when the economy is in better shape.

Finally, Target has recently become a Dividend King, an exclusive status given to a small group of stocks that have raised their dividends for 50 straight years. Target is now on year 53, which means it has raised its dividend since 1971, and it has kept up its streak through the dot-com bubble, financial crisis, hyperinflation, a global pandemic, and other events. Investors love Dividend Kings because they're super reliable.

Dividend Kings don't always have a high yield, though, because their attraction is in their stability and dependability. But at the current low price, Target's stock yields 4.5%, which is incredibly high. High yields often indicate risk, but Target is well established, with an excellent brand name and millions of loyal customers. It's still highly profitable, despite the pressure it's facing.

Target is likely to bounce back when the environment is more favorable, and in the meantime, it will cut you a nice check every quarter.

Airbnb stock: 36% off its all-time high

Keith Noonan (Airbnb): Airbnb (NASDAQ: ABNB) had its initial public offering (IPO) in December 2020 -- right at the peak of travel restrictions and social distancing conditions related to the pandemic. For a company in the travel and property rentals space, the situation presented huge challenges. Airbnb responded deftly to the conditions and quickly became a leaner and more efficient operation.

But despite bouncing back from pandemic headwinds, increasing the profitability of its business, and demonstrating high levels of flexibility, the stock hasn't managed to exceed the peak it reached shortly after its IPO -- and it trades down roughly 36% from its valuation peak.

Admittedly, the company's growth has slowed substantially. Revenue increased 8% on a currency-adjusted basis in the first quarter -- down from growth of 18% in Q1 2024 and growth of 24% in Q1 2023. After adjusting for the timing of holidays and other calendar differences, the company says that revenue would have been up 11% year over year in this year's first quarter, but the deceleration trend for sales expansion is clear nonetheless.

Amid some pricing trends on its rental marketplace that had adverse impacts for the business and moves from competitors, Airbnb has been facing a more challenging growth environment. At the same time, the company has continued to generate tons of free cash flow (FCF) and encouraging margins. The business has generated $4.4 billion in FCF over the trailing-12-month period -- good for a margin of 39%.

With such strong FCF margins, Airbnb could see its valuation surge if signs emerge that the company can shore up its sales growth rates. It's now in the process of developing new businesses to operate on top of its core rental platform. With a large and engaged user base, Airbnb has strong foundations that could allow it to successfully branch into new service categories.

The stock already looks reasonably valued, and shares could soar if some of the company's expansion bets turn out to be winners.

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Jennifer Saibil has positions in Airbnb and Walmart. Keith Noonan has positions in Airbnb. The Motley Fool has positions in and recommends Airbnb, Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.