It increasingly appears that a bubble has burst. All the stocks that were running hot during the pandemic have cratered since last November. The end result is that there are a number of undervalued stocks that are now great bargains.
Stay-at-home plays, SPACs, meme stocks, technology growth stocks, and shares of unprofitable innovative companies have all fallen big time over the past four months. Many of the most popular stocks of the past two years are down 50% or more. Some stocks, such as streaming giant Netflix (NASDAQ:NFLX) and connected fitness company Peloton (NASDAQ:PTON) have lost all their gains of the past two years and are now trading below the levels they were at before Covid-19 arrived on North American shores.
With many analysts saying that the market bottomed in mid-March of this year, now appears to be a good time to take positions in some beaten down names before they run substantially higher.
Here are three undervalued stocks to buy before they go sky-high.
- CrowdStrike Holdings (NASDAQ:CRWD)
- Nike (NYSE:NKE)
- Meta Platforms (NASDAQ:FB)
Undervalued Stocks to Buy: CrowdStrike (CRWD)
The threat of cyberattacks has grown with Russia’s invasion of Ukraine. Suddenly everyone is talking about the need for both private and public sector entities to bolster their cybersecurity efforts, including U.S. President Joe Biden.
The commander in chief said on March 21 that intelligence reports indicate Russia is “exploring” cyberattacks on U.S. targets as a means of retaliating for sanctions imposed on it for invading Ukraine. The president called on U.S. companies to immediately “accelerate efforts to lock their digital doors” and to remain vigilant against all manner of cyber threats.
“You have the power, the capacity, and the responsibility to strengthen the cybersecurity and resilience of the critical services and technologies on which Americans rely. We need everyone to do their part,” Biden said.
The warning helped to renew investor interest in cybersecurity stocks, chief among them CrowdStrike. Since Russian military troops crossed the border into Ukraine, CRWD stock has risen 35%. It’s been a stark turnaround for shares of CrowdStrike that were all but abandoned last fall, plummeting 50% from a 52-week high of $298.48 last November to a low of $150.02 at the start of March.
And even with the recent bump higher, CrowdStrike stock remains undervalued. Among 28 analysts who cover the company, the median price target on the shares is $256, implying a further 17% upside. Should a major cyberattack occur, CrowdStrike stock can be expected to run even higher.
Nike (NKE)
Nike just proved the naysayers wrong with a strong quarterly print. Despite facing numerous problems, ranging from a boycott of its products in China to supply chain issues at home in the U.S., the Beaverton, Oregon-based company delivered strong fourth quarter results that sent its slumping stock up 7%.
Nike reported that its sales in North America climbed 9% year-over-year, and net income for the three-month period ended Feb. 28 of $1.4 billion, or 87 cents per share, compared with $1.45 billion, or 90 cents a share, a year earlier. The results topped Wall Street profit estimates of 71 cents a share, according to Refinitiv data.
Nike further announced that its sales rose 5% to $10.87 billion in the quarter from $10.36 billion a year earlier, beating analysts’ expectations for $10.59 billion in revenue. For its current fiscal year, Nike reiterated its expectations for sales to grow mid-single-digits from the prior 12-month period. Analysts had forecast revenue to grow 5.3% this year.
Despite the better-than-expected financial results, NKE stock remains down 19% year to date. Analysts had been downgrading the stock leading into the surprisingly strong financial results, and are now having to again sharpen their pencils for upward revisions.
The median price target on Nike stock is currently $165, implying 23% upside. However, most of those targets were issued before Nike’s most recent results came out on March 21.
Meta Platforms (FB)
Love it or hate it, there’s no denying that shares of the company formerly known as Facebook are extremely cheap right now. Meta Platforms currently has a price-earnings ratio of 15, which is incredibly cheap for a mega-cap technology company.
How cheap? Right now, Meta Platforms P/E ratio is lower than either McDonald’s (NYSE:MCD), whose P/E sits at 24, or Coca-Cola (NYSE:KO), which has a P/E ratio of 27.
The average price-earnings ratio among technology stocks listed on the Nasdaq exchange is 25. This speaks to just how steeply FB stock has sold off this year on concerns of slowing online ad sales and the company’s pivot to focus on development of the virtual reality world known as the “metaverse.”
So far this year, FB stock has fallen 37%. As recently as last December, Meta Platforms’ stock was trading near $350 a share.
The pain began the day after Meta Platforms issued its most recent financial results. Missing analysts expectations across the board, and with weak forward guidance, Meta’s stock crashed 26% the next day, erasing $232 billion of market capitalization and making it the biggest one-day drop in value in the history of the stock market.
While bad for current shareholders, the steep decline provides an attractive entry point for new investors. And analysts seem to agree that Meta Platforms is seriously undervalued at current levels. The median price target on the shares is $320, suggesting a nearly 50% increase over the next 12 months.
— Joel Baglole
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Source: Investor Place