Stock Market Sell-Off: 3 Stocks That Wall Street Thinks Can Rally Roughly 40% Over the Next 12 Months

It’s been a tough year for the stock market, with the broader benchmark S&P 500 down 12% year to date, and much more from from highs reached in the back half of February.

The tech-heavy Nasdaq Composite is down 18% so far this year. It could be rough sledding in the near term, as investors try to navigate President Donald Trump’s ongoing tariffs and trade negotiations and understand the implications they may have on the broader economy, which had already begun to show cracks.

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Investing is about looking toward the future and trying to take advantage of sell-offs to buy stocks at good prices. Here are three stocks that Wall Street analysts think can rally at least 40% over the next 12 months.

E-commerce and tech conglomerate Amazon (NASDAQ: AMZN) has not been spared in Trump’s tariff saga, with shares down 23% this year. Analysts at Wedbush estimate that roughly 70% of goods sold on Amazon are made in China, and the trade dispute with the world’s second-largest economy seems far from over. Currently, Trump has imposed 145% tariffs on goods from China, which has hit back with 125% tariffs on U.S. goods. Higher prices for Chinese goods could hurt Amazon, as could weak consumer demand.

Still, Amazon CEO Andy Jassy recently told CNBC he thinks many of the company’s third-party sellers can successfully pass their higher costs on to consumers. Jassy also said Amazon has done preparation by negotiating “strategic forward inventory buys,” and will attempt to keep some prices low by negotiating better deals on select purchase orders.

Analysts at Citigroup think Amazon’s cloud business will remain resilient, and that efficiency gains made through automation and by regionalizing some of its business can support the company’s margins. Forty-six analysts have issued research reports on Amazon over the last three months, and 45 of them have a buy rating on the stock, with an average price target of nearly $260, according to TipRanks. That implies close to 43% upside from the stock’s price as I write this.

Given that the stock currently trades slightly below 29 times forward earnings, well below its five-year average of 39.4, Amazon is well positioned to be a good long-term buy, as it has built a moat that won’t be easily penetrated. While tech stocks may feel pressure in the near term, the company’s core online retail and e-commerce businesses are built to last.

Bank of America (NYSE: BAC), the second-largest bank in the U.S. by assets, has been hit hard this year, with its stock down 16%. Bank stocks came into the year with promise because the Trump administration looked poised to push deregulation and make it easier for mergers and acquisitions to get approved. Banks could also see lower and more favorable regulatory capital requirements, or at least not have to worry about higher requirements.

But since the tariffs have come into play, more economists and market strategists have grown concerned about a potential recession — and banks are cyclical. An economic slowdown could lead to higher loan losses, less loan growth, and less investment banking activity, just to name a few of the consequences.

However, Bank of America is a “too big to fail” bank, meaning the government and the Federal Reserve can’t afford to let the bank fail because it is too ingrained in the global financial system. And as we saw during the pandemic, BofA can easily navigate a tough backdrop while taking significant credit reserves for loan losses — reserves cut into earnings, although they can be released in later quarters if loan losses don’t materialize. Over the last three months, 18 analysts have issued research reports on the bank, according to TipRanks. The average price target on the stock is roughly $51 per share, implying about 39% upside for the stock price as I write this.

Citigroup analyst Keith Horowitz recently pointed to the “substantial discount” between Bank of America’s valuation and that of JPMorgan Chase.

Bank of America CEO Brian Moynihan has grown the balance sheet conservatively since the Great Recession, and ideally, the widening of yields between the two-year U.S. Treasury and 10-year U.S. Treasury bonds could enhance profit margins in the bank’s lending business, especially if recent concerns in the bond market dissipate.

Bank of America is typically a good buy below 2 times tangible book value, and who knows, maybe one day, banks will re-rate higher if they continue to demonstrate resilience during economic downturns and generate consistent and high returns on equity.

Electric aircraft company Archer Aviation (NYSE: ACHR) has excited investors with the prospect of bringing commercial air taxis to the masses. Archer has designed an electric aircraft that can take up to four passengers and a pilot on 20- to 50-mile trips. The aircraft are reportedly able to recharge quickly and are not terribly noisy, either.

While the concept of commercial air taxis is still novel, Archer has made tremendous progress toward bringing them to fruition: The company has achieved significant regulatory milestones and completed hundreds of test flights. In February, it announced it plans to build 10 of its Midnight aircraft this year for continued testing and launch programs with partners.

The company has also announced a “launch edition” program to distribute its aircraft commercially in “dozens of early adopter markets in advance of type certification of the aircraft by the FAA (Federal Aviation Administration).” Archer said its first Launch partner will be Abu Dhabi Aviation, later this year.

In late February, Canaccord Genuity analyst Austin Moeller said he sees many opportunities for the company to secure not only commercial contracts, but also government contracts through Archer’s partnership with Anduril Industries, which does a lot of work with the Department of Defense.

Over the last three months, seven analysts have issued research reports on Archer Aviation with an average price target of $12.83, according to TipRanks. That implies close to 79% upside for its price as I write this.

Given that the company has yet to generate revenue and has a multibillion-dollar market cap, its stock could be a lot more volatile than those of larger, more established companies like Amazon or Bank of America.

However, given Archer Aviation’s potential of being a first mover in this new market, the upside could be huge. For a high-risk, high-reward stock like Archer, I’d recommend a smaller, more speculative position to start. You can then accumulate more shares as the company achieves regulatory, operational, and financial goals.

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Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Citigroup is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bank of America, and JPMorgan Chase. The Motley Fool has a disclosure policy.

Stock Market Sell-Off: 3 Stocks That Wall Street Thinks Can Rally Roughly 40% Over the Next 12 Months was originally published by The Motley Fool