A lot of great companies have depressed stock prices right now, presenting attractive buying opportunities for investors looking for undervalued stocks.
Some of the biggest and most successful American companies have not shared in the uneven stock market rally that has occurred in 2021. Many stocks that posted big gains in 2020 have taken a pause or declined this year as investor sentiment continues to swing from growth-oriented securities to cyclical and value names.
Rather than get frustrated, discerning investors should seize the opportunity to buy shares of excellent companies while they are cheap, secure in the knowledge that they will eventually rise.
Here are three undervalued stocks that are worth grabbing right now.
Undervalued Stocks to Buy: Amazon (AMZN)
Despite reporting successive quarters of blockbuster earnings, Amazon stock has largely traded sideways in 2021. Year to date, AMZN stock is up 2%. Compared to its 69% gain in 2020, the company’s share price has been anemic through nine months of this year.
The lackluster performance runs counter to Amazon continuing to put up massive earnings that beat the expectations of Wall Street. What gives? A new chief executive officer in Andy Jassy (the first CEO changeover in the company’s history) coupled with a growing number of antitrust probes has weighed on the stock.
Investors also seem to be taking a wait-and-see approach to Amazon as the global economy reopens and people are expected to spend less time shopping online. However, at current levels, AMZN stock is not only underperforming, it looks undervalued.
The median price target of more than 40 analysts who cover the online retailer calls for the share price to rise 20% to $4,105. That seems a long way off the current share price of just over $3,400. Some analysts say it will take a big catalyst to get the stock moving again, such as an announcement that the shares will be split.
We shall see, but, in the meantime, Amazon stock is on sale.
Walmart is another great company whose share price has underperformed. Year to date, WMT stock is down 2%. In the past month, the stock has slumped 3%. Over a longer time period of 12 months, the share price is up only 4%.
Compare that to the stock performance of other, competing retail chains such as Target (NYSE:TGT), which is up 36% on the year and risen 60% over the past 12 months.
Like Amazon, Walmart has performed admirably during the pandemic as its brick-and-mortar locations remained opened and its online business accelerated. The company’s annual e-commerce revenue now tops $75 billion.
Walmart is also a dividend aristocrat. The company has increased its annual payout to shareholders every years since it first issued a 5-cent dividend back in 1974, and has maintained the dividend through good economic times and bad. Walmart’s current annual dividend stands at $2.20 per share for a yield of 1.53%.
Walmart says it is focused on improving its global supply chains, enhancing its e-commerce offerings and improving its omnichannel selling platform, all of which should benefit the company and its stock in coming quarters.
The median price target of 32 analysts who follow Walmart calls for the stock to climb 19% in coming months to $170 per share. This blue-chip stock is a buy.
Undervalued Stocks to Buy: Western Digital (WDC)
Data storage company Western Digital is an undervalued technology stock that investors should buy while the share price is down. Over the last six months, WDC stock has pulled back 12% and now trades at $58 a share.
The San Jose, California-based company is a leader in the data storage industry, including storage in the cloud, that is red hot right now as companies all over the world grapple with how to manage reams of data that continue to grow exponentially. And analysts agree that this company’s share price is well below where it should be.
The median price target on WDC stock is $92, suggesting nearly 60% growth from current levels. The high price on the stock is $140. The low price is $66, or 14% higher than where the shares are currently trading.
What’s the reason for the depressed share price? The consensus view appears to be that the company’s share price has been hurt by the ongoing shortage of semiconductor chips and slow uptake of 5G wireless internet. Reports that the company is in talks to merge with Japanese computer memory chip maker Kioxia in a $20 billion deal has also given investors pause.
However, analysts continue to see plenty of upside in WDC stock, with one upgrade after another provided on the share price in recent weeks.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.