When the stock market is volatile, as it has been in recent months, it can pay to focus on undervalued stocks.
Morningstar has created stocks/5-ultracheap-stocks-undervalued-by-more-than-50-buy”>a list of five “ultracheap” shares to buy. These are stocks that are trading more than 50% below the company’s fair value estimates. stocks are certainly down for a reason, so be aware of the risk and the need for patience, advises Morningstar.
In any case, here are five fantastic ones, starting with the most underrated as of November 3.
PayPal
PayPalPYPL, the payments company: Morningstar’s moat (durable competitive advantage) is narrow. Morningstar’s fair value estimate is $135. Thursday Price Quote: $55.05.
“The company is experiencing some near-term headwinds as the positive aspects of the pandemic reverse and the macroeconomic situation worsens,” Morningstar analyst Brett Horn wrote.
“Management is trying to combat the pressure by focusing more on improving margins, and we believe this is the right move. In the longer term, a combination of competitive opportunities and threats creates a wide range of outcomes.”
Albermarle
AlbemearleSUNRISE, the largest lithium producer in the world. Lithium is used in electric car batteries. The Morningstar moat is narrow. Morningstar’s fair value estimate is $300. Thursday Price Quote: $115.45.
“The market is concerned that spot lithium prices will fall further through late 2023 and 2024 due to oversupply,” wrote Morningstar analyst Seth Goldstein.
“We disagree and expect prices to rise in 2024 as battery producers’ inventory drawdown continues… “We see lithium returning to structural supply shortages in 2024.”
Etsy
EtsyETSY, the online craft market. The Morningstar moat is wide. Morningstar’s fair value estimate is $145. Thursday Price Quote: $63.20.
“Etsy offers compelling value for investors, despite a brutal 2023, which saw its share price fall a surprising (47)%,” Morningstar analyst Sean Dunlop wrote.
“While we understand the market’s concerns regarding the growth prospects of the craft market and its potential operating leverage, we consider their reaction short-sighted. “We envision a path to double-digit gross merchandise sales.”
Match
MatchTCM, the online dating services company. The Morningstar moat is narrow. Morningstar’s fair value estimate is $65. Thursday Price Quote: $29.30.
“Match Group’s pricing strategy is delivering profitability in terms of revenue growth,” wrote Morningstar analyst Ali Mogharabi. “That, combined with continued cost control, created operating leverage and produced an impressive third quarter.”
It said the third-quarter results showed the continued strength of the Tinder app and its brand and increased adoption and monetization of the Hinge app.
Saber
SaberSABR, an air reservation platform. The Morningstar moat is narrow. Morningstar’s fair value estimate is $9. Thursday Price Quote: $3.35.
“Despite management’s execution, shares are still down approximately (45)% this year,” Morningstar analyst Dan Wasiolek wrote. This is “driven by investor distaste for debt leverage companies amid a still uncertain economic environment and higher capital costs,” he said.
“We believe this concern is misguided, especially given Sabre’s improved liquidity profile.” It exceeded expectations in its latest earnings report.
The author owns PayPal shares.
