3 Overlooked Value Stocks Set to Surge as Rates Drop

Key Points

• Value investing is regaining relevance as overhyped AI stocks distract from fundamentally strong businesses.
• The retail sector is poised for growth amid expected interest rate cuts, presenting value opportunities in consumer-facing brands.
• CAVA, Lululemon, and UPS each offer distinct value-driven investment angles supported by solid fundamentals and analyst projections.

Value investing is an art that has become lost in the noise of hyped-up stocks that merely have to mention artificial intelligence to get investor attention. While AI grabs headlines, many fundamentally strong businesses are being overlooked—setting the stage for classic value plays to shine. This isn't something new. Emotional rallies are known to push solid companies into the background every cycle.

To take advantage of this divergence today, investors need to be on the hunt for companies creating value in their own ways.

With the Federal Reserve beginning its rate-cutting cycle, consumer activity could rise in the months ahead, so some of the best setups can be found in the consumer discretionary sector.

In this environment, stocks like CAVA Group Inc. NYSE: CAVA, Lululemon Athletica Inc. NASDAQ: LULU, and United Parcel Service Inc. NYSE: UPS offer unique value angles for portfolios right now.

CAVA: The Next Chipotle-Style Growth Story

The fast-casual restaurant business model has been proven successful, as evidenced by the rise of Chipotle Mexican Grill Inc. NYSE: CMG. 

However, after years of steady growth, Chipotle's $53.2 billion market cap is too big to achieve the percentage growth rates that value investors like to see. That leaves room for smaller competitors like CAVA, valued at $7.2 billion, to deliver faster growth and bigger shareholder upside.

CAVA's earnings forecasts support that thesis. According to the MarketBeat consensus forecast, CAVA is expected to deliver an EPS of $0.24 by the second quarter of 2026, a significant increase from its current EPS of $0.16. Analysts have also assigned CAVA a consensus price target of $96.40 per share, implying over 50% upside.

Since the stock trades at only 36% of its 52-week high, it seems the risk-to-reward favors the buyers by a mile.

Lululemon: Temporary Setback, Long-Term Strength

After a couple of quarters showing potential mismanagement, Lululemon's stock fell to a low of 40% of its 52-week high. However, the news isn’t as bad as it seems.

The company invested significantly more in building inventories than an average quarter, which hurt cash flows and bottom-line earnings. But these issues were strategic moves by management to protect against future tariff costs.

It is no secret that the Lululemon brand is still very popular among today’s consumers, giving it a moat that bearish sentiment has overlooked. Despite its troubles, analysts still see upside, giving it a consensus price target of $239.30 per share (42% upside) from Wall Street analysts.

As interest rate cuts lift consumer confidence, Lululemon may be well positioned to recover. For investors, the dip may represent a chance to buy a premium brand at a rare discount.

UPS: The Retail Boom’s Silent Workhorse

While not a direct retail player, UPS is deeply embedded in the sector’s infrastructure as a shipper of e-commerce orders. As such, UPS stands to benefit from the expected increase in consumer spending, much of which will be through online shopping.

Currently trading at just 58% of its 52-week high, UPS presents a compelling case for investors on the hunt for value opportunities. Especially when you consider its analyst consensus price target of $111.44, which reflects a potential 33.3% upside.

Notably, institutional confidence remains strong. AQR Capital Management increased its stake to $231.4 million in August 2025, signaling a belief that current prices undervalue UPS’s future potential. For value investors, that’s a noteworthy endorsement.