Nasdaq stocks are back in fashion, with the Nasdaq-100 off to one its strongest first halves of a year on record.
This might leave investors feeling that they have missed out. Is it too late to be shopping for Nasdaq bargains?
The good news is that while the Nasdaq is up to a huge degree, there are still pockets of value out there. Beyond the hottest AI stocks and other trendy trades, there are still some high-quality, undervalued Nasdaq stocks… including these three top picks.
Cisco (CSCO)
Cisco (NASDAQ:CSCO) is the world’s dominant provider of internet networking equipment. The company has long been famous for its routers, switches, and other such essentials for managing digital connectivity.
CSCO shares have generally traded at a low valuation as investors perceive this to be a commodity business with only modest growth prospects. That’s true to an extent: Software certainly has more attractive upside than hardware vendors in most cases.
That said, Cisco has been undergoing a major strategic shift. In recent years, it has layered a lot more software and security offerings on top of its core business In fact, subscription revenues now make up more than 40% of Cisco’s total overall base and are growing at a double-digit rate.
Over the past year, we’ve seen shares of Oracle (NYSE:ORCL) and other legacy tech companies explode higher as investors wake up to their newer growth verticals. At less than 14x forward earnings, Cisco shares should be poised for a similar rerating.
Huntington Bancshares (HBAN)
The banking sector had a rough start to the year. The rapid rise in interest rates along with instability in sectors such as venture capital led to several large bank failures. Investors sold the sector off mercilessly as a result.
However, things have calmed down. Deposit levels have stabilized. Recent stress tests showed all 23 of the nation’s largest banks are in better shape now than last year. And loan performance and credit quality remain strong despite the worries around commercial real estate.
All this to say that investors should give strong regional banks like Huntington Bancshares (NASDAQ:HBAN) another look. HBAN stock is down 25% year to date, despite upbeat earnings results. Shares now go for less than eight times forward earnings. The company pays a generous 5.9% dividend yield.
Morningstar’s Eric Compton is optimistic on HBAN stock, seeing fair value at $15 per share versus today’s price of less than $11. He believes the bank’s stable deposit base and unique auto financing business are among its strong points.
PayPal (PYPL)
PayPal (NASDAQ:PYPL), by some accounts, may just be the most undervalued large-cap Nasdaq stock out there today. Morningstar analyst Brett Horn sees fair value way up at $135 per share, implying PYPL stock is roughly 50% undervalued today.
It’s worth adding that PayPal traded around $110 per share prior to the onset of the pandemic, and at one point hit $300 during the ensuing tech stock boom. Was $300 a fair price for PayPal? Not at all. But today’s sub-$70 level may be a severe overcorrection.
PayPal is now selling for less than 14 times forward earnings, and analysts continue to see that figure growing at a double-digit rate.
It’s true that PayPal isn’t going to see the same sort of explosive growth that it did in 2021. The confluence of factors that led to that period’s e-commerce and payments growth was unique.
But the core PayPal business is still operating normally and is increasing in size. And other irons in the fire such as Venmo offer intriguing upside as well. PayPal’s dismal stock performance over the past 18 months has caused many people to give up on it, but a closer look at the business results indicate that there is still a lot to like here.
On the date of publication, Ian Bezek held a long position in HBAN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
