Jefferies picks four cheap SMID-cap stocks likely to outperform next year

As reported by CNBC, U.S. investment bank Jefferies has named four cheap stocks that remain unfamiliar to most retail investors but, in its view, have a strong chance of outperforming in 2026. The bank’s analysts say the market has been “very narrow” this year and should "broaden out," driven by better earnings growth among small- and mid-cap stocks. Jefferies’ picks have market capitalizations below $55 billion and improving earnings/sales growth in 2026; ranked relatively cheap on the bank's so-called growth-at-a-reasonable-price factor (GARP factor); and recorded positive momentum using its 1-month change in 200-day moving average factor. 

Shares of programmable chip developer Lattice Semiconductor are up 24% in 2025 and trade at a premium to peers in the chip sector. Jefferies believes the valuation is justified due to the company’s strong position in AI and edge computing. The bank’s target price of $85 per share implies 21% upside for the stock over the next 12 months.

“Upcoming catalysts include next-gen server deployments, continued hyperscaler investment and incremental share gains in mid-range FPGA markets,” Jefferies wrote, referring to so-called Field-Programmable Gate Array integrated circuits. “With execution strength, differentiated technology, and a clear roadmap for growth, Lattice remains one of our top [small- to midcap] picks in semiconductors.”

Entergy, one of the largest operators of nuclear power plants in the U.S., has a Jefferies target price of $116 per share, which is 19% above the stock’s closing level at the end of last week. Jefferies described Entergy as "one of our top utility ideas with among the best exposure to data-center growth, accelerating and enhancing an already-leading profile.” 

“The story is driven by data centers in the near term but has longer-term potential benefits from reshoring, LNG demand, and overall U.S. industrial revitalization," the Jefferies analysts wrote.

Signet Jewelers and Lincoln Electric are other cheap stocks that could outperform next year, Jefferies noted. The former is the world’s largest retailer of diamond jewelry, while the latter is a leading manufacturer of welding equipment.

Wall Street remains optimistic about the outlook for all four stocks: the WSJ consensus forecast for each is "overweight." Lattice Semiconductor has 14 “buy” and "overweight" recommendations, one “hold,” and one “underweight." Sixteen coverage analysts out of 24 have a bullish stance on Entergy. For Signet Jewelers and Lincoln Electric, upbeat ratings also dominate, with almost no "sells."

The market sees the highest one-year upside in Lattice Semiconductor, at 14%. Both Signet Jewelers and Lincoln Electric, meanwhile, offer 13% upside. The (MarketWatch) consensus on Entergy is the tightest, with the target price of $105 per share implying 9% upside.