Investors who think that stocks are overpriced should think again. There are currently a number of woefully undervalued stocks of leading companies that are ripe for the taking.
Some of the biggest and most stable blue-chip stocks have declined this year, presenting great buying opportunities. Savvy investors would be smart to view the shares of established companies that have been pushed lower in recent months as being on sale right now.
In addition to offering attractive entry points, many of the most undervalued stocks offer dividend payments to investors, as well as the potential for big future gains.
Here are four undervalued stocks still worthy of your money as we head into the final quarter of 2021.
Undervalued Stocks to Buy: FedEx (FDX)
Investors on the hunt for a great undervalued stock need look no further than FedEx. The Memphis, Tennessee-based shipping and supply chain management company’s stock is on sale right now – big time.
The share price is up a modest 1% year-to-date, but has pulled back 15% since hitting a 52-week high of $319.90 in mid-May. FDX stock is currently below the lowest analyst price tVarget of $270 per share. The median price target on the stock is $351, implying more than a 30% increase in coming months. The high target on the stock is $397.
In terms of its price-earnings ratio, FDX stock has a trailing 12-month P/E of 13.7, lower than the transportation air freight and cargo industry’s average P/E of 16.6, and markedly lower than rival UPS‘ (NYSE:UPS) P/E of 28.1. Clearly, FedEx is undervalued right now and has plenty of upside ahead of it.
The decline in FedEx’s fortunes is due to warnings of slowing growth in the year ahead. The company has guided that it will likely earn $90 billion of revenue for its current fiscal year 2022, a 7% increase over fiscal 2021. Single-digit revenue growth is frowned upon by Wall Street given that the company’s revenues grew more than 20% in fiscal 2021.
Still, despite the current slowdown, Federal Express remains a great company with strong long-term prospects. And at current valuations, the stock is a steal for investors.
Roku, the manufacturer of internet-connected television sets, digital media players and an advertising behemoth, has seen its stock price deflate ever since the Silicon Valley-based company reported that the streaming hours on its devices declined by nearly 1 billion hours between the first and second quarters as the economy reopened and people emerged from Covid-19 hibernation.
Since the Q2 results were made public, ROKU stock has declined 30%, from a 52-week high of $490.76. Yet there remains a lot to like about Roku and its future prospects. Investors should see the current drop as a buying opportunity.
Despite the current drop, Wall Street remains incredibly bullish on ROKU stock. The media price target on the shares is currently $486.50, implying a 42% gain ahead. There were very few downward revisions to the stock after the second quarter results were announced.
Famed stock picker Cathie Wood of Ark Invest, who focuses on disruptive technologies, has been adding Roku shares to several of her actively managed exchange traded funds (ETF) as the share price has declined. Roku is also pursuing an original content strategy that is being praised by analysts, and there are rumors the company could be targeted for a takeover by Comcast (NASDAQ:CMCSA).
Undervalued Stocks to Buy: Visa (V)
The global economic reopening was supposed to be a boon to credit card company Visa. As consumers started spending again on travel, leisure and dining out, Visa and its shareholders were expected to make out like bandits. Yet any windfall has not been reflected in Visa’s share price.
Year-to-date, V stock is up just 5%. And over the last month, the share price has slumped 6% to its current level of $228. Shareholders are rightfully asking: What gives?
Yet despite its weak performance so far this year, investors would be smart to see a smart long-term investment in V stock. After all, there are 3.6 billion (that’s ‘billion’ with a ‘b’) branded credit cards active around the world today. Plus, Visa is taking steps to remain on the cutting edge, gobbling up a number of small financial technology (fintech) companies to expand its footprint in digital payments, and even experimenting with cryptocurrency payments.
Investors should also like that Visa regularly repurchases its own stock and pays a dividend of 32 cents per share each quarter.
Consider that cardholders charged more than $11 trillion to their Visas in 2019 before the pandemic and it’s hard to bet against the long-term outlook of the credit card issuer.
It might sound hard to believe, but online retailer and e-commerce juggernaut Amazon has been the laggard among so-called FAANG stocks this year. After enjoying a stellar gain of 82% in 2020, AMZN stock has risen a modest 8% so far in 2021, trailing all the other major technology companies that it is measured against.
This despite the fact that Amazon’s earnings have continued to defy the expectations of Wall Street (the company has reported three consecutive quarters of revenues in excess of $100 billion). The economic reopening and installation of the first new chief executive officer in the company’s history seem to have led investors to take a wait-and-see attitude.
Regardless of how investors see AMZN stock, the company continues to fire on all cylinders, grow its market share, and expand into new markets. Amazon has hardly missed a beat since Andy Jassy took over the CEO role from Jeff Bezos in July of this year.
The company’s online retailing and cloud computing businesses continue to go gangbusters and its “other” revenue segment that is mainly comprised of online advertising skyrocketed 87% year- over-year in this year’s second quarter to $7.9 billion. With a trailing P/E multiple of just 60, Amazon looks downright affordable compared to its technology peers (Roku’s P/E is more than 200).
Investors would be smart to buy AMZN stock now before the next leg up.
On the date of publication, Joel Baglole held a long position in V. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.