Now’s the time to start looking for undervalued stocks to buy. The stock market has slumped to start the month of August, with the benchmark S&P 500 index down nearly 3% since July 31.
After rising 20% in the first seven months of the year, the S&P 500 looks to be taking a breather as we enter the tail end of summer. The decline is surprising given that the U.S. Federal Reserve has signaled that it is likely to pause its interest rate increases for the time being.
Plus, second quarter earnings from corporate America have been better-than-expected, with 79% of companies beating Wall Street forecasts.
Reasons given for the August slump include profit taking and persistent fears about an economic recession that has yet to materialize.
Whatever the reason, the current pullback makes several undervalued stocks even cheaper and more attractive to purchase.
It’s not too late for investors to buy quality stocks at low prices and reap the rewards when the rally resumes and extends out to the entire market.
Here are seven of the most undervalued stocks to buy for 2023.
Airbnb (ABNB)
Airbnb (NASDAQ:ABNB) just reported Q2 beats on both the top and bottom lines.
However, ABNB stock was flat the day after its latest print.
In the days leading up to the company’s Q2 results, the stock fell 8%. While Airbnb’s share price has managed a nice recovery year-to-date, the stock is currently trading 1% higher than its December 2020 initial public offering.
Investors would be smart to buy ABNB stock while it’s on sale. The shares are currently trading 8% below their 52-week high making it one of the more attractive undervalued stocks to buy.
Starbucks (SBUX)
Retail coffee chain Starbucks (NASDAQ:SBUX) is another of the undervalued stocks to buy at current levels.
Year-to-date, SBUX stock hasn’t moved. The share price is up 0.02% since January. The stock hit a 52-week high at the start of May and has declined 13% since then, presenting a window for investors to take a position while the price is favorable.
Most recently, Starbucks announced mixed Q2 financial results, trumpeting that its sales in China have rebounded strongly but noting that sales in North America have softened.
North American same-store sales grew 7%, missing estimates of 8.4%. Starbucks reaffirmed its 2023 outlook, forecasting revenue growth of 10% to 12%. The company raised its EPS growth estimate to 16% to 17% from the low end of 15% to 20%. Make no mistake. This is a top undervalued investment.
Norwegian Cruise Line (NCLH)
Down nearly 20% in the last month, Norwegian Cruise Line (NYSE:NCLH) looks like a bargain right now.
The cruise operator’s share price has taken a turn for the worse after the company gave weak forward guidance as part of its Q2 print.
This is disappointing as Norwegian delivered blowout financial results for the second quarter, with its EPS rising 126% from a year earlier and its sales climbing 85% higher than the second quarter of 2022.
The company announced Q2 EPS of 30 cents, surpassing consensus forecasts of 27 cents. Revenue came in at a record $2.21 billion, exceeding Wall Street forecasts of $2.18 billion.
Unfortunately, these stellar results were completely overshadowed by the fact that Norwegian Cruise Line provided guidance for the current third quarter that was weaker than anticipated.
Management said they expect Q3 EPS to come in at 70 cents, while analysts were expecting 79 cents. This is definitely a buy-the-dip opportunity.
General Motors (GM)
Shares of Detroit automaker General Motors (NYSE:GM) continue to struggle, presenting a nice entry point for buy-and-hold investors.
Through five years, the company’s share price is flat. Investors can now buy GM stock with a rock-bottom P/E ratio of 5x.
The shares also come with a quarterly dividend payout of 9 cents a share, which equates to a yield of 0.98%. The downturn in GM stock comes despite the company reporting solid Q2 earnings and raising its forward guidance.
The company reported Q2 EPS of $1.91, which was better than the $1.85 consensus estimate of analysts. Revenue for Q2 totaled $44.75 billion versus $42.64 billion that was expected on Wall Street.
General Motors also said it is increasing its cost-cutting measures and now plans to eliminate $3 billion in expenditures, up from $2 billion of cuts that were previously announced.
These are all positive developments that should help GM stock over the long haul.
Pfizer (PFE)
Down 32% on the year and trading at nine times future earnings, with a hefty dividend that yields 4.68%, drug maker Pfizer’s (NYSE:PFE) stock looks pretty attractive right now.
The company’s share price slumped further after its Q2 financials were made public, showing a steep drop off in sales of its Covid-19 medications. The company reported Q2 revenue of $12.73 billion, down 54% from a year earlier.
Excluding sales of the company’s Covid-19 vaccine and its Covid-19 antiviral pill called Paxlovid, revenue at Pfizer grew 5% year-over-year during Q2.
Sales of Pfizer’s Covid-19 medications totaled $1.6 billion in the April through June quarter, down sharply from a year ago.
The company lowered its 2023 sales forecast to a range of $67 billion to $70 billion, a decline from a previous outlook of $67 billion to $71 billion. Pfizer reiterated its full-year earnings outlook of $3.25 to $3.45 per share.
The company added that a strong pipeline of new medications should help it find new areas of growth moving forward. This is currently one of the best bargain stocks around.
Amazon (AMZN)
Finally, Amazon (NASDAQ:AMZN) delivered a quarter that analysts and investors had wanted from the e-commerce giant.
The company knocked the cover off the ball with its Q2 financial results, reporting EPS of 65 cents, which was 85% higher than the 35 cents expected by analysts who cover the company.
Revenue in Q2 amounted to $134.4 billion versus $131.5 billion that was forecast. Amazon Web Services (AWS) earned $22.1 billion in revenue during the quarter, greater than the $21.8 billion that Wall Street expected.
Additionally, advertising across Amazon’s various services and platforms totaled $10.7 billion in Q2, beating consensus forecasts of $10.4 billion.
The latest results represented Amazon’s biggest earnings beat since the fourth quarter of 2020 and were largely due to aggressive cost-cutting.
AMZN stock jumped 8% higher after the Q2 print, bringing its year-to-date gains to 62%. While impressive, it’s important to remember that Amazon had been the laggard among big tech stocks up until now.
Compare the performance of AMZN stock to Meta Platforms (NASDAQ:META), whose share price is up 150% on the year. Despite its current run, Amazon’s stock remains 25% below the all-time high it reached in July 2021. This makes Amazon an undervalued stock to buy.
Nike (NKE)
Nike’s (NYSE:NKE) stock continues to be a crushing disappointment. The company released its fiscal fourth quarter earnings on June 29, and they did nothing to help the stock’s performance.
In fact, due to lower profit margins and stagnant inventories, the sneaker and athletic apparel maker reported its first earnings miss in three years. Revenue in the quarter beat expectations, coming in at $12.83 billion compared to $12.59 billion that was forecast by analysts.
However, Nike announced EPS of 66 cents versus 67 cents that was forecast on the Street.
NKE stock fell 3% immediately after the company announced its Q1 earnings. The share price is now down 8% on the year and 18% below its 52-week high.
If there’s a silver lining for investors to cling to it is that Nike’s stock has not retested its 52-week low following the Q1 print. This suggests that Nike’s share price may have bottomed.
There is also news that several prominent investors have been buying NKE stock all the way down, including George Soros, making this one of the undervalued stocks to keep your eyes on.
On the date of publication, Joel Baglole held a long position in GM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
