Here are 2 cheap stocks that could turn red hot in 2026, according to experts
Even as UK shares reach record highs, there are still plenty of cheap stocks for investors to explore. And while cheap stocks are often discounted for a good reason, every once in a while, a rare buying opportunity can emerge, paving the way for some jaw-dropping recovery returns.
Having surged over 1,000% in just three years, Rolls-Royce shares serve as a perfect example of the explosive gains investors can potentially earn. So the question now becomes, which company’s going to be the next Rolls-Royce in 2026?
Well, right now there are two stocks experts have flagged as strong contenders.
1. JD Sports Fashion
The last few years have been rough for JD Sports Fashion (LSE:JD.) shares, having tumbled over 60% from their 2022 peak.
Thanks to a product innovation crisis from its key partner, Nike, the sports apparel retailer suffered through numerous profit warnings and downgrades. Yet, with these troubles potentially in the rear-view mirror, analysts at Peel Hunt have described JD Sports Fashion as “chronically undervalued”, reiterating a 200p share price target.
That’s 144% higher than where the stock trades today! While ambitious, Peel Hunt might be onto something.
The firm’s latest trading update saw its largest market, North America, return to like-for-like growth. As such, management reiterated its target of delivering £400m in free cash flow for its 2026 fiscal year (ending in February). And according to Peel Hunt’s own estimates, JD Sports’ shares currently trade at just seven times its projected 2027 fiscal year earnings.
Having said that, economic headwinds and growing fears of a recession don’t bode well for premium consumer discretionary retailers. But even if market conditions prove stronger than expected, JD remains largely dependent on Nike to deliver popular new products â something the sports brand has struggled with lately.
Nevertheless, with impressive recovery potential on the table, JD Sports definitely deserves a closer look, in my opinion.
2. Card Factory
Similar to JD Sports, Card Factory‘s (LSE:CARD) another retailer analysts have highlighted as a potential big winner. Following a pretty painful profit warning in December, the shares promptly crashed by over 20%. And while the gift and greeting card business has seen a small recovery, the stock remains dirt cheap at a price-to-earnings ratio of just 5.7.
So it’s no surprise UBS has issued a 120p share price target while Canaccord Genuity is even more bullish at 150p.
That’s a potential recovery return of 115% over the next 12 months, driven by self-help initiatives and leveraging its unique vertical integration advantage. And with a recent trading update confirming the group’s on track to deliver on revised expectations, its recovery story might have just kicked off.
Management’s strategy to pivot away from low-margin cards to high-margin gifts definitely seems prudent. But it nonetheless comes with significant execution risk. After all, the strategy involves store reconfigurations and the establishing of new supply chains, both of which entail their own set of complexities.
Nevertheless, much like JD Sports, the recovery potential might make these risks worth taking. So in my mind, this is another cheap stock for investors to investigate further. But these aren’t the only opportunities I’ve got on my radar.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. 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.
