Small-cap stock picks poised to rally in the 2nd half, according to BofA

This cosmetics retailer has struggled in 2026. Ulta stock has fallen 20% year-to-date as consumer demand has declined, while rivals such Amazon and Sephora have attempted to expand their market share.

BofA remains bullish on Ulta stock, though, predicting that a turnaround is imminent and maintaining a bullish price target.

“Our $685 PO is based on 22x our F27E EPS estimate, which we view as appropriate for a business with a defensible moat, improving earnings conversion, and a more productive investment cycle,” Carey Hall wrote.

One of Ulta’s competitors also makes BofA’s list. While elf Beauty stock has also struggled in 2026, it is only down 11% for the year. Carey Hall sees as one of the market’s idiosyncrasies, maintaining a bullish price target of $85.

The analyst described elf as having “margin expansion potential,” and noted that it is likely to benefit from the tariff rebounds as the US economy continues a gradual recovery from last year’s disruptions.

Wayfair stock started the year strong but quickly slid into the red as sticky inflation and high tariffs sparked a consumer pullback. Shares are down 11% year-to-date but BofA sees the online home furnishing retailer as a likely winner as supply chain pressures ease.

“With Wayfair margins toward the lower end of its 10%+ long-term EBITDA margin, but seeing below historical levels of revenue growth, we think a multiple slightly below the historical average is warranted,” Carey Hall said.

Unlike many of BofA’s top picks for small-mid cap stocks to buy, Charles River Laboratories has performed well this year, with 7% year-to-date gains.

The contract research organization works with pharmaceutical and biotech companies to expedite drug development. While Carey Hall noted that the stock’s growth has been compromised by declines in biotech spending, she maintains a bullish $220 price target.

The software intelligence firm operates a Software-as-a-Service (SaaS) enabled platform that can track the health and safety of digital infrastructure. BofA views Dynatrace as an industry disruptor with fundamentals that are improving steadily.

“New AI strategies and ongoing digital modernization is making observability platforms like Dynatrace more important to ensure high quality experiences are delivered,” Carey Hall added. “This should drive more platform usage and accelerating revenue growth for Dynatrace.”

While many of BofA’s top small-mid cap stock picks have struggled so far this year, MKS Inc. has surged 145% year-to-date. The under-the-radar firm operates in the industrial technology and advanced manufacturing spaces.

“We highlight MKSI as our top 2H26 SMID cap idea as we expect it to benefit from a surge in Wafer Fabrication Equipment (WFE) capacity expansions and tech upgrades in CY26-28 to support multi-year AI infrastructure demand as a key subsystem supplier,” Carey Hall stated.

The real estate investment trust (REIT) has performed well this year, rising 15% year-to-date. While the residential real estate market has been tough in 2026, EastGroup’s focus on industrial properties has helped it continue trending upward.

BofA sees demand remaining high, particularly across the US sunbelt region. which it sees it as bullish for EastGroup. Additionally, Carey Hall sees it benefitting from the ongoing data center buildout that her team doesn’t foresee slowing down this year.

BofA sees the software firm as an example of a turnaround story. Samsara stock is down 9% year-to-date, even as investors have rushed to pile into tech stocks. But Carey Hall maintains that it is destined for growth in the near future.

“Samsara’s competitive advantages are widening as data scale and platform breadth deepen differentiation versus point solutions, raise switching costs, and support better win rates,” she said. “We expect these dynamics, alongside growing contribution from new product innovation, to drive accelerating large customer momentum and wallet share expansion.”