AbbVie, Alibaba, and Bank of America are three undervalued stocks that investors should consider buying amidst the current surge in the stock market. These stocks offer bargain prices compared to the rest of the market, providing an opportunity for investors to benefit.
AbbVie, a pharmaceutical company, currently trades at a low valuation of only 13 times forward earnings. This is significantly lower than the S&P 500’s forward-earnings multiple of 19.5 times. The low valuation is primarily due to concerns surrounding AbbVie’s top-selling drug, Humira, which faces biosimilar competition. As a result, Humira’s sales have been declining, impacting AbbVie’s overall revenue and profits. However, AbbVie has two successors to Humira on the market, Rinvoq and Skyrizi, which are expected to generate peak sales that surpass Humira. Additionally, the company has other products and pipeline candidates that are projected to enable long-term growth in the next couple of years. In the meantime, AbbVie offers a dividend yield of over 4.1% and has consistently increased its dividend for 51 consecutive years.
Alibaba Group Holding, a leading e-commerce and technology company, stands out as an exceptional undervalued stock in a sector where many stocks have premium valuations. Alibaba’s stock currently trades at less than 10.5 times forward earnings. The company’s revenue growth has slowed down, mainly due to the ongoing impact of COVID-19. However, Alibaba’s underlying business still holds significant potential, particularly in its cloud-services segment with the rising interest in generative AI. Alibaba’s plans to break up into six separate units also present an opportunity for value unlocking. Investors can take advantage of Alibaba’s bargain valuation without having to wait for the restructuring process.
Bank of America is another undervalued stock that investors should consider. While it has seen some recovery, the bank stock still trades at a low valuation of only 9.4 times forward earnings. The failures of several US banks in the first quarter of 2023 caused disruption in the banking industry, leading to a temporary decline in Bank of America’s stock price. However, the bank experienced significant growth during this period, reporting an 11% year-over-year increase in revenue and a 19% surge in earnings in the second quarter. Bank of America is ranked number one in estimated US retail deposits, online banking, small-business lending, and customer satisfaction for US retail-banking advice. This high-quality stock is still available at an attractive price.
Investors should seize the opportunity to buy these undervalued stocks while they remain at bargain prices. Despite the concerns surrounding each company, they all possess strong long-term growth potential. AbbVie’s successors to Humira and its diverse product portfolio position it for future success. Alibaba’s underlying business and its cloud-services segment offer significant prospects. Bank of America’s strong financial performance and industry-leading position make it an appealing investment. With their current valuations, these stocks present an attractive opportunity for investors seeking quality stocks at reasonable prices.
