Investors looking to scoop up undervalued S&P 500 stocks are in a position to see the recent doldrums as an opportunity.
The stock market continues to be in free-fall mode after its most recent selloff pushed the S&P 500 roughly 20% below its record highs. Rising inflation and interest rates have unnerved investors, and a rebound in the stock market seems unlikely anytime soon.
“The degree of market loss this year is staggering,” said Mark Hackett, Nationwide’s chief of investment research.
It’s been a culmination of multiple macro-economic factors, including the War in Ukraine has had a debilitating effect on the stock market.
Several growth stocks, particularly those in the formerly high-flying tech industry, have taken a massive beating. Here are seven undervalued S&P 500 stocks that are trading at multi-year lows.
|PENN||Penn National Gaming||$28.50|
Auto titan Ford (NYSE:F) revolutionized the car industry in the early 1900s, churning out internal combustion engine (ICE) vehicles at an incredible pace.
However, by 2040, it plans to end the production of ICE vehicles.
Ford’s stock had a strong 2021, with shares rising more than 100% thanks to the investor enthusiasm for the company’s pivot towards electric vehicles. Nonetheless, F stock trades under 0.38 times forward sales, which is significantly below the sector average.
Its EV sales have been booming of late, with a 221.50% increase on a year-over-year basis last month alone. Ford’s F-150 Lightning electric pickup truck is gaining traction among customers. This is the kind of growth potential that people look for in undervalued S&P 500 stocks.
Additionally, the Mustang Mach-E posted an incredible sales record with a 166% bump from the prior year. Looking ahead, it has the potential to solidify its position in the EV sector, challenging some of the biggest names in the business.
Meta Platforms (FB)
Shares of social media giant Meta Platforms (NASDAQ:FB) have sold off at a staggering pace since last year.
After losing more than 50% since the beginning of the year, those who believe in the metaverse certainly see it as among the best undervalued S&P 500 stocks to buy.
According to experts, the metaverse is no different and poised to become a multi-billion dollar sector. Meta is investing heavily in positioning itself as a leader in the nascent industry.
Additionally, its core businesses continue to grow at a healthy pace, bolstering sales at a compound annual rate of 41.30% in the past 10 years.
Telecom giant AT&T (NYSE:T) is a new-look business again after spinning off its media assets into Warner Bros. Discovery.
The spin-off has unlocked a significant amount of cash flow which will be used to curb its massive debt balance. The funds will also focus on developing 5G and fiber, which will be the biggest growth drivers for the business going forward.
Both these segments experienced massive net additions during the first quarter. 289,000 new customers were added in the first quarter.
The company plans to invest $24 billion into its fiber and 5G capabilities in 2022 and 2023. Much of it concerns the broad acceptance of remote work, the growth of connected drives and the rise of streaming, which demand greater bandwidth.
It might seem odd to include Amazon (NASDAQ:AMZN) in a list of undervalued S&P 500 stocks to buy, especially since its recent stock spli made it more attractive for retail investors.
Like so many others, though, AMZN stock has also taken a hit due to the current market downturn. Additionally, its core eCommerce businesses face headwinds.
Despite a myriad of challenges, though, Amazon remains an excellent long-term investment. The challenges in its eCommerce business are transitory, and the company will likely recover in the upcoming quarters.
Its Cloud business remains a star as Amazon Web Services (AWS) continues posting double-digit revenue and profit growth.
AWS posted a 37% bump in revenues from the same quarter last year during the first quarter. Moreover, its backlog stands at $88.9 billion, up almost 70% on a year-over-year basis. Overall, Amazon’s revenue growth is still amazing, considering the size and scale at which it operates.
Southwest Airlines (LUV)
Even though it is one of the undervalued S&P 500 stocks you should consider looking into, Southwest Airlines (NYSE:LUV) has arguably been the pick of the airline stocks over the years.
It achieved 47 straight years of profitability through 2019 and amassed a fortress of a balance sheet. Despite the effects of the pandemic, it still has $16.5 billion in liquidity and a net cash position of over $3.2 billion.
The healthy liquidity balance could potentially restore shareholder payouts in 2023 and 2024.
Southwest primarily focuses on leisure and domestic travel, a competitive advantage against its peers, which face plenty of risks about the return of business and international travel.
Air travel demand has been picking up at an explosive pace, with strong booking numbers reported late. Wages and fuel costs will impair profitability, but over time these costs will normalize due to a mixture of efficiencies and higher fares.
Intel (NASDAQ:INTC) has had it rough over the past few years, as its competition closed ground.
It has developed a reputation as a laggard stock but makes sense as one of the undervalued S&P 500 stocks to buy at these levels.
Intel has an extensive plan to build a foundry business, turning its rivals into customers. It plans to spend 35% of its sales on capital expenditures this year, while the next few years will feature low profits and cash flows. The capital intensity will likely persist through 2024, after which the company plans to cool off its spending.
The next few years may require plenty of faith for Intel investors as profits and cash flows are likely to take a big hit.
In the long run, the tech firm expects sales to grow to mid-to-high single digits next year to 2024, subsequently rising to 10% to 12% by 2025.
Penn National Gaming (PENN)
Penn National Gaming (NASDAQ:PENN) is a leading casino operator which offers iGaming and sports betting services. It has established itself as a top player in the industry with a robust margin structure.
With the closure of casinos due to the pandemic, Penn’s RBIT margins came in at a measly 5.98% in 2020 compared to 17.98% in the following year. The incredible profitability will drive significant cash flow growth and result in higher shareholder rewards.
Penn spends 30% of its revenues on customer acquisition, which is significantly lower than the industry average. Moreover, it has a meaningful stake in the online sports book Barstool Sports.
Barstool attracts over 66 million visitors each month, a formidable user base that adds immense value to Penn’s business. PENN stock trades under one times forward sales, compared to the five-year average of 1.30 times.
On the date of publication, Muslim Farooque 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.