Bank of America advises: Take advantage of the downturn and invest in these two promising stocks

There are frequent fluctuations in the stock market today, but an experienced investor knows that the long-term performance of individual stocks is determined primarily by their underlying fundamentals. A popular approach among investors is to focus on companies that are temporarily undervalued, even though their future prospects remain positive.

Bank of America has focused on two stocks that are currently under pressure but have strong upside potential in the coming year.

Vistra Energy $VST

Vistra Energy is an American energy company based in Texas that specializes in power generation. It is the largest competitive generator company in the US and serves more than 5 million customers. The company has more than 41,000 megawatts of generating capacity, allowing it to provide power in a variety of forms, from gas and coal to nuclear and solar.

Although Vistra has faced recent concerns regarding regulations on specialty power arrangements, the company's stock has experienced a 40% decline since its peak in January. However, this decline came despite the company's solid financial results. In 2024, Vistra reported a 16.5% year-over-year increase in revenue, and net income from ordinary activities rose to $2.93 billion, a significant year-over-year increase.

Bank of America analyst Ross Fowler sees Vistra as a company with excellent growth prospects. He recommends buying the stock with a target price of $152, suggesting growth potential of 33% over the next year.

Credo Technology Group $CRDO

Credo Technology Group is a technology firm that focuses on developing high-speed connections for data infrastructure. It specializes in the manufacture of components such as optical DSP chips and active electrical cables, and is a leader in serializer-deserializer (SerDes) technology. With a growing focus on cloud computing, artificial intelligence, IoT, 5G and streaming video, Credo's products are becoming key to modern data infrastructure.

Despite a 37% decline in the stock YTD, Credo reported strong results, with a 154% year-over-year increase in revenue in the third quarter of fiscal 2025. The company expects its revenue to continue to grow, with 86% of its revenue coming from customer Amazon Web Services.

Vivek Arya, an analyst at Bank of America, sees great upside potential for Credo, estimating the stock to grow by as much as 78% over the next year. He puts a $75 target price on the stock.

Disclaimer: You will find a lot of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source: Yahoo Finance