U.S. economic data released in September was quite positive for the markets. Excluding higher fuel costs, retail sales, for example, increased 0.2%. Similarly, excluding energy, the producer price index rose only 0.1% in August, a small increase that will probably keep the Fed from increasing rates. Meanwhile, the labor market remains quite healthy as jobless claims came in at a historically low 220,000. With further improvements, markets could push even higher, which could benefit these undervalued stocks.
Undervalued Stocks: Intel (INTC)
Positive catalysts continue to pile up for Intel (NASDAQ:INTC). For one, analysts at Citi just said Intel’s third-quarter results would come in above its guidance. All thanks to higher-than-expected shipments of notebook computers. Two, Nvidia (NASDAQ:NVDA) has suggested that it would be open to letting Intel manufacture its chips. And three, as I noted just a few days ago, tech site, wccftech believes that “Intel’s new AI chip could go toe-to-toe with Nvidia’s equivalent offering. Moreover, the chips are significantly less expensive.” Despite positive catalysts, Intel only has a forward price-earnings ratio of 22. That’s roughly in line with the S&P 500’s average price-to-earnings (P/E) ratio.
Luckin Coffee (LKNCY)
Luckin Coffee (OTCMKTS:LKNCY) created a positive stir in China by unveiling an alcohol-infused coffee drink — which reportedly uses China’s widely loved Moutai. According to Seeking Alpha, “Moutai Coffee” was trending on a popular Chinese social media website, Weibo, while “more than 5 million cups” of the beverage were sold on the day that it went on sale. Even better, company revenues reportedly jumped 88% year over year. Meanwhile, same-store sales jumped 21% year-over-year. Despite the company’s rapid growth and the positive boost that I believe Moutai Coffee will provide to the company, its shares are changing hands at a relatively low forward price-earnings ratio of 17.5.
Undervalued Stocks: Adobe (ADBE)
Adobe (NASDAQ:ADBE) is harnessesing artificial intelligence to enhance the power of its software. For example, the company’s Firefly generative AI model gives customers access to apps, such as Illustrator’s vector recoloring, Express text-to-image effects, and Generative Fill tools with Photoshop. Adobe only released the general version of Firefly on Sept. 13, so it may take a while for its full impact to be fully reflected in the company’s financial results.
ADBE stock has a relatively low forward price-earnings ratio of 31.
General Motors (GM)
Most of the headlines about General Motors (NYSE:GM) now focus on the United Auto Workers strike. But that issue should be resolved in a relatively short time. I believe that the longer-term outlook of GM stock is quite upbeat, given its very popular trucks and SUVs, along with its strong lineup of electric vehicles and low valuation. Also bullish on GM is Swiss bank UBS which recently started coverage of GM with a $44 price target and a “buy” rating. The firm believes that GM’s profits from gasoline-powered vehicles will enable it to effectively build up its EV lineup.
Also noteworthy is that GM plans to greatly increase the number of EV brands that it offers and intends to start offering EV versions of a number of its most popular trucks. As a result, the automaker is well-positioned to become a global leader in the EV race. In addition, over the long term, the company’s self-driving unit, Cruise, should meaningfully boost its top and bottom lines.
Undervalued Stocks: Six Flags Entertainment (SIX)
In-line with my previous predictions, some amusement park operators appear to be gaining from the pain of Disney’s parks. The latter phenomenon has been sparked by Disney’s (NYSE:DIS) political battles and its decision to sharply hike the amount it costs to visit its parks. One of the beneficiaries could be Six Flags (NYSE:SIX), where analysts predict earnings will jump to $2.14 in 2024 from just $1.24 in 2023. It’s also reportedly benefiting from “a solid growth trajectory in attendance, revenue, and earnings,” as noted by President and CEO Selim Bassoul.
EVgo (EVGO)
EVgo (NASDAQ:EVGO) operates one of America’s largest networks of fast electric vehicle chargers. It has also partnered with many impressive companies, including General Motors, Tesla (NASDAQ:TSLA), Ford (NYSE:F), and Hyundai (OTCMKTS:HYMTF).
Encouragingly, EVgo recently noted its fast chargers meet the Biden administration’s guidelines for being reimbursed by the federal government. The news indicates that Washington will release funding for thousands of EV chargers to states, in line with the terms of the Bipartisan Infrastructure Law, relatively soon. Even better, the company is growing quickly. In fact, its top line just soared about 457% year over year to $50.6 million.
According to CEO Cathy Zoi, “EVgo had a phenomenal second quarter with significant growth in key areas including stalls, throughput, customer accounts, utilization, and revenue. We are pleased to report EVgo’s network throughput growth is accelerating, demonstrating the leverage in our business and financial model as the auto sector rapidly electrifies.”
Powell Industries (POWL)
As I noted in a prior column, Powell (NASDAQ:POWL) is well-positioned to benefit from the electrification of transportation and Washington’s spending on infrastructure improvements. Helping, Tesla CEO Elon Musk says that by 2045 electricity demand in the U.S. would triple from current levels. That could be a sizable catalyst for Powell moving forward. In addition, given the company’s rapid growth and potential, its forward price-earnings ratio of 20.5 is quite low.
On the date of publication, Larry Ramer held long positions in EVGO and INTC. His wife held a long position in LKNCY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
