These stocks could have serious upside potential.
The S&P 500 just finished its worst first half of any year since 1970. Fortunately for investors, the broad market weakness has created some compelling value opportunities. Persistently high inflation and concerns about a potential U.S. recession have most high-risk stocks trading well below their 2021 highs, but broad market weakness has also dropped the share prices of many high-quality value stocks as well. If the Federal Reserve can avoid a recession, these value investing opportunities likely won’t last for long. Here are seven undervalued stocks to buy with forward earnings multiples of less than 15, according to research firm CFRA Research.
Exxon Mobil Corp. (ticker: XOM)
Exxon Mobil is the largest publicly traded U.S. integrated oil company. The oil and gas industry has been one of the few bright spots in an abysmal market in 2022, and Exxon shares are actually up 40.7% year to date as of July 8. Fortunately for value investors, rising oil prices have also boosted Exxon’s earnings, and its forward earnings multiple is just 8.3. Analyst Stewart Glickman says developments in the U.S. Permian Basin and offshore regions in Africa will provide further production growth opportunities for Exxon. CFRA has a “buy” rating and $116 price target for XOM stock, which closed at $86.08 on July 8.
Pfizer Inc. (PFE)
Pfizer is one of the largest global pharmaceutical companies. In the past two years, Pfizer has gotten a lot of headlines and sales from its COVID-19 vaccine and booster shots jointly developed with partner BioNTech SE (BNTX). Glickman says the launch of Pfizer’s COVID-19 treatment Paxlovid should be a near-term sales catalyst, while Pfizer’s remaining mid- and late-stage drug candidate pipeline should keep the stock headed in the right direction in the longer term. In addition to its growth opportunities, Pfizer shares trade at just 8 times forward earnings. CFRA has a “strong buy” rating and $69 price target for PFE stock, which closed at $53.17 on July 8.
AbbVie Inc. (ABBV)
AbbVie is another global pharmaceutical company, and its lead drug is rheumatoid arthritis treatment Humira. Glickman says AbbVie faces significant risk from the loss of exclusivity for Humira in 2023, considering the drug accounted for about 37% of AbbVie’s total revenue in 2021. Fortunately, immunology drugs Skyrizi and Rinvoq brought in a combined $4.6 billion in sales in 2021. AbbVie has guided for more than $15 billion in combined sales for Skyrizi and Rinvoq by 2025. AbbVie shares trade at just 11 times forward earnings. CFRA has a “buy” rating and $165 price target for ABBV, which closed at $152.85 on July 8.
Bank of America Corp. (BAC)
Bank of America is one of the largest U.S. commercial investment banks and wealth management services providers. Rising interest rates are typically great news for banks’ net interest margins, but Bank of America shares are down 28.5% year to date as of July 8 on concerns about loan growth. Analyst Kenneth Leon projects loan volume and balances in the bank’s commercial and industrial units will continue to rise. Bank of America’s stock trades at a forward earnings multiple of just 9.7. CFRA has a “buy” rating and $47 price target for BAC stock, which closed at $31.79 on July 8.
Merck & Co. Inc. (MRK)
Merck is another one of the world’s leading biopharmaceutical companies. Glickman says Merck’s decision to spin off its Organon & Co. (OGN) subsidiary in 2021 has made Merck a more attractive growth investment. He says Merck’s November 2021 acquisition of Acceleron Pharma will boost its drug portfolio and expand its presence in the cardiovascular disease treatment market. In the near term, COVID-19 oral drug treatment molnupiravir will continue to generate impressive sales. Merck shares trade at just 12.6 times forward earnings and pay an attractive 3% dividend. CFRA has a “strong buy” rating and $100 price target for MRK stock, which closed at $92.78 on July 8.
Broadcom Inc. (AVGO)
Broadcom is a diversified global semiconductor device developer and supplier. Tech stocks have been hit hard in 2022, but Broadcom isn’t the typical high-growth, low-profit tech stock. Broadcom generated nearly $2.6 billion in net income in the most recent quarter, trades at just 12.5 times forward earnings and pays a 3.3% dividend. In May, Broadcom announced plans for a huge $61 billion buyout of VMware Inc. (VMW). Analyst Angelo Zino says the VMware deal will give Broadcom more software exposure and help improve its financial visibility. CFRA has a “buy” rating and a $580 price target for AVGO stock, which closed at $498.69 on July 8.
Comcast Corp. (CMCSA)
Comcast is a media conglomerate with a diversified portfolio of cable and broadcast television assets, including NBCUniversal, the Peacock streaming service and Universal Films. Analyst Keith Snyder says NBCUniversal’s advertising business and Comcast’s theme park business should recover in 2022. The legacy media business isn’t the most appealing market for investors, but Comcast still reported nearly 14% revenue growth in the most recent quarter. Snyder says the company has sufficient financial flexibility as it invests in broadband-led connectivity. Comcast shares trade at just 11.3 times forward earnings. CFRA has a “buy” rating and a $55 price target for CMCSA stock, which closed at $39.96 on July 8.
7 undervalued stocks to buy now:
— Exxon Mobil Corp. (XOM)
— Pfizer Inc. (PFE)
— AbbVie Inc. (ABBV)
— Bank of America Corp. (BAC)
— Merck & Co. Inc. (MRK)
— Broadcom Inc. (AVGO)
— Comcast Corp. (CMCSA)
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Update 07/11/22: This story was published at an earlier date and has been updated with new information.