The move lower in the FTSE 100 and FTSE 250 has left investors with a difficult dilemma. Some FTSE shares sold off could be undervalued bargains. Others could be value traps, with the potential to fall much further. Differentiating between the two can be hard, but here are a couple of stocks on my watchlist.

Engines ready

The first one is easyJet (LSE:EZJ). The well-known budget airline has seen its share price fall 25% over the past year and 29% in the past three months. At first glance, the dip looks alarming. But when I dig a little deeper, it starts to resemble the kind of temporary turbulence long-term investors often learn to ignore.

The primary culprit has been a sharp shift in the macro environment rather than any collapse in the business. The escalation of tensions in the Middle East has pushed jet fuel prices sharply higher. This immediately squeezes easyJet’s profit margins.

At the same time, investors have grown nervous about inflation and interest rates staying higher for longer, raising concerns about discretionary spending, such as holidays. Add in a weaker pound (which inflates dollar-denominated fuel costs), and you have a perfect storm for the company.

Despite the share price weakness, demand remains robust. Q1 results from the end of January showed that summer bookings are strong. In fact, the CEO noted the “largest-ever January booking period.”

The holidays division continues to grow rapidly. This points to a business that’s still benefiting from structural demand for low-cost travel across Europe.

From a valuation perspective, the disconnect is even clearer. The shares are currently trading on a price-to-earnings ratio of 5.4, which is exceptionally low for a company with solid growth prospects. If the situation in the Middle East eases over the coming month or so, I think the stock could rally to a much fairer valuation.

A transformation titan

Another option is GB Group (LSE:GBG). The tech firm provides digital identity verification and fraud prevention services, helping businesses confirm who their customers are and detect suspicious activity.

The stock’s lost 37% over the past year, with 25% of that loss occurring in the past three months. The situation in the Middle East has been a factor, with the company also having flagged that tariff-related and geopolitical uncertainty would weigh on growth, particularly in the US.

The business is also in the process of migrating to a simpler operating model and a single global platform. In the half-year results from late last year, early signs of progress came through. Revenue rose 1.8% versus the same period last year, with adjusted operating profit up 1.9%. Granted, nothing to shout about, but certainly the steadying of the ship.

I think the worst is now behind the company, and the ongoing changes should materially boost profits in the coming year. The short-term move to me feels like a classic case of weak sentiment overwhelming a business that’s actually making steady operational progress.

Of course, if geopolitics provides more headaches this year, then it remains a risk for GB Group. But, on balance, I think both easyJet and GB Group have been oversold and could be worth considering.