Small-cap stocks have been inching up in recent sessions but there are a bunch of names that are still trading at a significant discount.
These stocks are all the more attractive to own ahead of Trump’s inauguration on January 20th.
Why? Because the incoming government is broadly expected to take a pro-business stance that tends to help small-cap stocks.
Having said that, here are the top 3 small-cap stocks that are currently cheap to own.
Bath & Body Works Inc (NYSE: BBWI)
Bath & Body Works stock has been in a sharp uptrend over the past two months but TD Cowen analysts continue to see further upside in it through the rest of 2025.
The investment firm recently dubbed the small-cap specialty retailer an “underappreciated story” as it’s strongly positioned for earnings upside on the back of continued expansion outside of shopping malls.
Analyst Jonna Kim expects BBWI to benefit from marketing initiatives and the loyalty program as well.
“Candles and sanitizer category overhang is starting to abate and international sales are being less of a drag,” she added in a recent research note.
Kim even went on to call Bath & Body Works stock the best idea for 2025 in her note to clients as it’s undervalued compared to its growth and margin profile at writing.
Alaska Air Group Inc (NYSE: ALK)
Morgan Stanley analyst Ravi Shanker dubs Alaska Airlines stock a top pick for 2025 even though it has more than doubled already since early August.
The company’s $1.9 billion acquisition of Hawaiian Airlines last year will serve as a meaningful catalyst for growth over the long term, he argued in a note to clients.
We like this opportunity from the HA integration, which has evolved into a transformation of both Airlines to embark on a path to become the next intercontinental mainline carrier.
Shanker likes Alaska Airlines shares at current levels also because the small-cap air carrier will see significantly easier comps this year and has a sizeable $1.0 billion buyback planned as well.
Academy Sports and Outdoors Inc (NASDAQ: ASO)
Academy Sports and Outdoors is different from the other two small-cap stocks on this list as it’s lost 30% since March of 2024.
But the small-cap chain of sporting goods stores now offers favorable risk-reward that makes its shares worth buying this year, according to Citi analyst Paul Lejuez.
“We see signs of comps pressure abating in F25 driven by a recovery in several pandemic categories … and a tailwind from new stores entering the comp base,” he told clients in a recent report.
Lejuez sees significant room for square footage growth ahead that he’s convinced will help unlock further upside in sales for ASO in 2025.
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