The stock market’s rebound is offering plenty of bargains for investors hunting for value. When the market declined for three consecutive months from August to October, investors saw stock prices and valuations pushed down.
Also, the gains seen in the market this year have been concentrated in a handful of mega-cap technology stocks. Most of them are tied to artificial intelligence (AI).
Consequently, plenty of well-known stocks are looking undervalued at current levels. Investors who pounce now are sure to be rewarded as the market rally broadens and a rising tide lifts all boats. Let’s examine the three most undervalued long-term stocks to buy this month.
American Airlines (AAL)
Since U.S. airline travel is now back above pre-pandemic levels, investing in American Airlines (NASDAQ:AAL), the largest carrier in the world, would be prudent. Unbeknownst to most investors, a complete recovery in air travel has occurred, and the number of people flying today is now above 2019 levels before the Covid-19 crisis struck. In fact, the number of airline passengers recently exceeded 2019 levels for a record 68 consecutive days.
However, American Airlines yet to recover from the ravages of the pandemic. AAL stock is down 12% over the last year and trading 66% lower than five years ago. Currently, the company’s share price is near its 52-week low. It appears cheap, trading at just five times future earnings estimates. The stock was knocked lower after the company posted a loss for this year’s third-quarter and lowered its profit outlook for the remainder of the year.
American Airlines has been challenged by a new contract with its 15,000 pilots. The deal provides them with more than $9 billion of additional pay and benefits. Also, rising crude oil prices made jet fuel more expensive. But with air travel now back above pre-pandemic levels and oil prices falling to below $75 a barrel, a rebound could be in the cards for AAL stock.
Walmart (WMT)
Investors who search for buy-the-dip opportunities need look no further than Walmart’s (NYSE:WMT), which recently issued its Q3 results.
WMT stock fell 7% immediately after the company provided cautious guidance for the current fourth quarter of the year and the holiday shopping season. Surely, WMT’s Q3 financial results beat Wall Street forecasts, with the company reporting earnings per share (EPS) of $1.53 versus $1.52 that was expected. Revenue totaled $160.80 billion compared to $159.72 billion anticipated.
Walmart claims a boost from grocery sales, which have been strong during a period of high inflation. Customer transactions during Q3 rose 3.4%, with the average ticket price growing 1.5%. Also, e-commerce sales increased 24% year over year (YOY).
However, Walmart provided a cautious outlook, saying consumer spending is weakening heading into the holidays. The company now expects EPS of $6.40 to $6.48 for the entire year, below analysts’ expectations.
Before the Q3 print, WMT stock had increased 18% this year and was trading at an all-time high. Investors would be smart to take advantage of the post-earnings pullback and buy shares in this leading retailer.
eBay (EBAY)
Shares of eBay (NASDAQ:EBAY) took a hit after the e-commerce company reported its Q3 results. Down 12% over the last year, including a 5% decline in 2023, EBAY stock looks undervalued.
The shares currently trade at just seven times future earnings estimates, which is especially low for a technology company. And, unlike most tech stocks, eBay pays a quarterly dividend to its shareholders. EBAY’s dividend payout is currently 25 cents a share each quarter, giving it a generous yield of 2.50%.
Similar to Walmart, EBAY stock took a hit after the company provided disappointing forward guidance, which overshadowed the fact that the company beat Wall Street forecasts with its Q3 print. The company announced Q3 revenue of $2.5 billion, up 5% from a year ago and in line with analyst forecasts. EPS came in at $1.03, topping consensus estimates of $1. EBAY said it’s seeing strong demand for a new feature that uses artificial intelligence (AI) to help customers write product descriptions.
If it weren’t for the lowered guidance, EBAY stock might be flying high right now. Also, the company continues to return cash to shareholders, buying back $651 million of stock in Q3. It is committing to returning 125% of free cash flow to shareholders through 2024. Investors should take advantage and buy this stock while it’s still undervalued.
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.
