The recent stock market crash has left many FTSE 100 stocks trading well below their 52-week highs. According to Stockopedia, there are currently more than 50 stocks in the blue-chip index trading 30% or more below their one-year high.
For long-term investors willing to look beyond the near-term challenges associated with Covid-19, these lower share prices could be a huge opportunity. With that in mind, here’s a look at two FTSE 100 stocks I believe have the potential to rebound 50%+ in the medium term.
One of the most profitable companies in the FTSE
Property website Rightmove (LSE: RMV) has seen its share price fall by around 33% since mid-February. This means the stock would have to rise by about 50% to get back to where it was pre-coronavirus. Is that possible? I believe so.
Of course, I don’t expect Rightmove shares to rise 50% in the short term. Property consultancy Knight Frank is predicting that around 520,000 house sales will be abandoned this year due to the coronavirus. That suggests it’s going to be a challenging year for the residential real estate industry. Rightmove recently offered its clients (estate agents) a significant discount, which will hit its top and bottom lines.
However, looking further out, I expect conditions to improve. Britons are obsessed with property, and when lockdown measures are eased, house sales should pick up again. Rightmove, as the clear market leader in the UK property website space with a market share of nearly 90%, should benefit.
It’s worth pointing out Rightmove recently advised that it’s confident it has the financial capacity to withstand this challenging period. It’s also worth noting RMV is one of the most profitable companies in the entire FTSE 100. Last year, it had an operating margin of 74% and a return on capital employed (ROCE) of 384%.
All things considered, I see Rightmove as a high-quality company that’s experiencing a short-term setback. I think the stock will rebound significantly when an element of normality returns.
This FTSE 100 stock has fallen nearly 60%
Another FTSE 100 stock I believe has the potential to rise 50% in the medium term is ITV (LSE: ITV). It’s currently nearly 60% below its 52-week high of 166p. A 50% rise from here would push the stock back to around 108p. I think that’s achievable.
Like Rightmove, ITV is going to experience challenges in the near term. Not only have advertising revenues taken a hit, but the group has been forced to pause a significant number of productions due to lockdown measures.
However, these challenges won’t last forever. When lockdown measures are eased, the company will be able to continue producing content. And when economic activity picks up, advertising revenues should increase. This should lead to a rebound in ITV’s share price.
In the short term, the FTSE 100 company has the financial power to withstand the challenging conditions. In a trading update in late March, the group advised it has £150m of unrestricted cash, as well as a £630m Revolving Credit Facility expiring in December 2023, of which only £100m is currently drawn. It also said it has no bond repayments until September 2022.
Weighing everything up, I think ITV is cheap at current levels. If you’re patient, I think you could be looking at 50% upside, or more.
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Edward Sheldon owns shares in Rightmove and ITV. The Motley Fool UK has recommended ITV and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.