Recent volatility in the stock markets has allowed investors to buy discounted quality stocks you couldn’t find earlier in 2024. For example, the S&P 500 lost 8.5% from its 52-week high of 5,669.67 in mid-July to its Aug. 5 closing price of 5,186.33. That’s an average of 0.60% per day over the 14 days.   

I saw an article from late July about Alphabet (NASDAQ:GOOG, GOOGL) stock falling 5% in a day. The article tried to explain why the stock fell. The reality is that the recent market correction has made even the best stocks susceptible to big swings, Alphabet being no exception.

Whenever volatility increases, I like to find discounted quality stocks on sale that generally wouldn’t be. For example, despite the index’s Aug. 6 rebound rally of a little over 1%, plenty of stocks are down more than 5% since the beginning of August. 

Some fell more than 5% in a single day and have become attractive buy-on-the-dip candidates. Here are my three favorites.

Airbnb (ABNB)

Airbnb (NASDAQ:ABNB) stock was down 6.5% through Aug. 6. It lost 14.3% on Aug. 7 in early trading. 

After the markets closed, the short-term rental company reported Q2 2024 results on Aug. 6. Investors did not like the earnings miss, earning 86 cents in the quarter, five cents less than the Wall Street estimate. They really didn’t like the third-quarter revenue estimate for 9% growth at the midpoint of guidance, about $140 million less than analyst expectations. 

In addition, the company’s room nights booked in the second quarter were 125.1 million, 1.5 million short of the consensus. 

“[W]e are seeing shorter booking lead times globally and some signs of slowing demand from U.S. guests,” stated its Q2 2024 shareholder letter. 

First of all, Airbnb isn’t a U.S.-only business. It has hosts worldwide. Just because Americans aren’t traveling as much doesn’t mean the rest of the world isn’t. 

Most importantly, it expects its 2024 free cash flow margin to be several points above its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin of at least 35%. 

Assuming 2024 revenue growth of 8%, it should have full-year sales of $10.69 billion, which translates to free cash flow of $3.96 billion (37% margin estimate). Based on an enterprise value of $73.54 billion, it has a free cash flow yield of 5.4%. Anything between 4% and 8% is fair value, indicating a reasonable entry buy point.    

Etsy (ETSY)

Etsy (NASDAQ:ETSY) stock is down 17.1% in August through Aug. 6. It lost 7.6% on Aug. 1 after reporting quarterly earnings. It regained 3.8% of those losses early in Aug. 7 trading. 

Etsy reported mixed Q2 2024 results on July 31. Its revenue was $647.8 million, $18.2 million higher than the consensus estimate from Wall Street. On the bottom line, it earned 41 cents a share, which is four cents less than analyst expectations. 

However, overall, the business remains in excellent health. Its gross merchandise sales (GMS)—it takes a piece of every sale on its platform—were $2.95 billion, $140 million higher than the analyst estimate. 

Further, its active buyers managed to squeeze out a 0.4% gain to 96.6 million, while active sellers were 8.8 million, 5.9% higher year-over-year. Further, gifting GMS increased by 4.1% in the quarter. It now accounts for 27% of GMS overall.

These are all good things as it continues to work toward a better balance between growth and profits. 

“In fact, second quarter adjusted EBITDA was about 28%, ahead of our guidance and up 130 bps from last year, as we gained leverage year-over-year on employee costs and cost of revenue, which was partially offset by higher level of performance marketing investments to help fuel buyer growth and frequency,” stated Etsy Chief Financial Officer Rachel Glaser. 

Etsy hasn’t traded this low since April 2020. 

Bath & Body Works (BBWI)

Bath & Body Works (NYSE:BBWI) stock was down 13.9% in August through Aug. 6. It lost 5.5% on Aug. 2 and was down less than 1.0% early in Aug. 7 trading.

Bath & Body Works has struggled to regain the good sales vibes during Covid as everyone and their dog was buying hand soap to keep safe. However, the reality is that even though its stock is down nearly 30% in 2024, it hit a one-year high of $52.99 in early June, its highest level since May 2022. 

Again, like the other two stocks, its shares have fallen precipitously on subdued guidance for the remainder of 2024. 

Because of reduced consumer spending, it expects 2024 sales to drop by 1.25% at the midpoint of its guidance. While that was a 25 basis-point improvement in guidance, it was well below the analyst estimate of a 0.37% drop. 

On the bottom line, it expects adjusted EPS of $3.20 at the midpoint, which is also better than the company’s previous guidance but 11 cents below the analyst estimate of $3.31. 

By every metric, it’s cheaper than in the past four years. Sometimes, analysts do get it wrong. 

This discounted quality stock is a buy for long-term investors who don’t mind earning 2.55% on the dividend until it can start growing again.

On the date of publication, Will Ashworth 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.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.