The US consumer price index (CPI) was up more than expected in January, raising doubts about the Federal Reserve’s ability to lower interest rates further in 2025.
For investors, it could be a signal to focus more on value stocks this year as they have a history of outperforming growth stocks in the six months after the last rate cut, according to Bank of America strategist Savita Subramanian.
Assuming the one in December was the last rate cut from the US central bank for now, the following are the two cheap stocks that she expects will do particularly well in 2025.
First Solar Inc (NASDAQ: FSLR)
First Solar has been cut in half over the past eight months on concerns the Trump administration could repeal parts of the Inflation Reduction Act that have been helping the likes of FSLR.
But the sell-off has gone a little too far, creating an opportunity for the long-term investors to load up on a quality name at a deep discount, Subramanian told clients in a recent note.
First Solar currently has its forward earnings yield at 12.9% only.
Mizuho analyst Maheep Mandloi also raised his rating on FSLR shares to “outperform” last week. His $259 indicates potential for a more than 60% upside from current levels.
Mandloi is not too worried about how tax credits may play out under the new US government as “assuming 45X expires after 2026 (1-year off-ramp), we see less pain for FSLR any way offset by tariffs.”
This will lead to better negotiating power for First Solar in 2027, the analyst added. First Solar stock does not, however, pay a dividend at writing.
CVS Health Corp (NYSE: CVS)
Another value stock to own if you’re convinced the US Fed may not be able to cut interest rates any further this year is CVS Health.
At about 10.7% forward earnings yield, CVS is a cheap stock at writing, according to Savita Subramanian of the Bank of America.
The for-profit healthcare company has rallied hard in recent sessions on the back of a strong earnings release for its fourth financial quarter.
CVS quarterly results turned Cantor Fitzgerald analyst Sarah James more bullish on “increased confidence in a successful turnaround now that we have proof-of-concept cost trends returned to predictable patterns, and 2025 bids should be sufficient to drive margin expansion.”
Despite a strong report and a post-earnings rally, shares of CVS Health are down nearly 20% versus their 52-week high at writing, which makes them all the more exciting to own, according to James.
Her “overweight” rating on CVS stock is coupled with a $71 price target that indicates potential for another 10% upside from current levels.
Finally, a 4.04% dividend yield serves as the cherry on top for those interested in owning CVS for the long term.
The post Top 2 cheap stocks to buy for 2025 appeared first on Invezz