These 2 TSX Stocks Have up to 49% Upside, Bay Street Analysts Say

Besides Street analysts’ positive expectations, here are the main fundamental factors that could drive these two TSX stocks higher in the near term.

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The Canadian stock market is continuing to scale new heights in 2024 as the TSX Composite benchmark recently posted a fresh all-time high above 22,400 level. Strong corporate results and rising hopes that the Federal Reserve and the Bank of Canada will soon start cutting interest rates could be two of the main reasons for the recent market rally.

Despite the broader market rally, however, many fundamentally strong stocks haven’t seen much appreciation of late, making them look undervalued to invest for the long term. Buying such cheap stocks now could help investors get solid returns in the long run.

In this article, I’ll highlight two such TSX stocks that Bay Street analysts expect to surge by up to 48% in the next 12 months and also discuss the factors that could drive their rallies.

Air Canada stock

Air Canada (TSX:AC) has been one of the worst-performing TSX stocks in the last five years. It currently has a market cap of $6.6 billion, and its stock trades at $18.48 per share after losing more than 15% of its value in the last year alone. However, Bay Street analysts’ 12-month average target price for AC stock is currently $27.56 per share, which is around 49% higher than its current market price.

After the COVID-19 pandemic badly affected its business, shares of the largest Canadian passenger airline company tanked by 53% in 2020. Even as pandemic-related operational challenges have subsided and its financials have significantly improved in recent years, Air Canada stock has failed to recover.

Last year, Air Canada reported a solid 21.9% year-over-year jump in its total revenue to $21.8 billion, even much higher than its revenue of $19.1 billion in the pre-pandemic year 2019. Similarly, its 2023 earnings figure of $4.56 per share was much better than its 2019 annual earnings of $3.37 per share. Despite that, this popular TSX stock is still down about 62% from its 2019 closing level of $48.51 per share, making it look way too undervalued to buy now for the long term.

Mullen stock

Mullen Group (TSX:MTL) is also another attractive TSX stock you can buy on the dip right now to hold for years to come. This Okotoks-based logistics company currently has a market cap of $1.1 billion as its stock trades at $12.73 per share after sliding by around 20% in the last year.

Interestingly, MTL stock also offers an attractive 5.7% annualized dividend yield at the current market price. Bay Street analysts’ 12-month average target price for Mullen stock is currently at $17.70 per share, reflecting around 39% upside potential from the current levels.

In the five years between 2018 and 2023, Mullen’s total revenue rose 58.2%, and its adjusted annual earnings jumped 184.3%, reflecting a strong long-term trend in the company’s profitability.

Although softening freight and logistics demand amid the ongoing macroeconomic challenges have affected the company’s financial growth in the last year, its long-term growth outlook remains promising due mainly to its consistent focus on strategic acquisitions and market expansion with strong financial management. Also, lower interest rates in the near term could lead to a recovery in the demand for Mullen’s diversified logistics solutions and help its financials improve fast. Given that, I wouldn’t be surprised if this TSX stock stages a sharp rally in the coming quarters.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has positions in and recommends Mullen Group. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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