7 Seriously Undervalued Large-Cap Stocks to Buy Now
Undervalued Large-Cap Stocks: Nvidia (NVDA)
Few large-cap technology stocks have been beaten down as much as semiconductor company Nvidia (NASDAQ:NVDA). NVDA stock is down 54% year to date. Last November, the company was trading above $300, and that was after a 4-for-1 stock split.
The share price has been hurt by mounting fears that demand for Nvidia’s chips and semiconductors will slow along with the global economy. To be sure, the company’s earnings for the second quarter were a disaster and didn’t help the share price any.
Nvidia reported Q2 earnings per share of 51 cents, which was 60% lower than the $1.26 per share in earnings that Wall Street was looking for. Revenues for the April through June quarter amounted to $6.7 billion, which was also well below the $8.10 billion analysts had called for.
Nvidia also lowered its forward guidance, saying it now expects revenue for the just-completed third quarter to come in at about $5.9 billion, which is below consensus estimates of $6.95 billion.
Nvidia CEO Jensen Huang has stressed that the company is grappling with a “challenging macro environment” this year. Still, Nvidia, whose chips are used in everything from supercomputers to artificial intelligence applications, remains a solid long-term buy.
The P/E ratio is a little high at 44 times, but it has come down this year with the share price. And, unlike many tech stocks, Nvidia pays a dividend that yields 0.12%. It’s not the most generous dividend, but it makes NVDA one of the more reliable undervalued large-cap stocks to buy.
Berkshire Hathaway (BRK-A, BRK-B)
As is usually the case, legendary investor Warren Buffett is riding out the current market downturn just fine.
In addition to many of the stocks he holds in Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) portfolio, Buffett has been taking advantage of the drop in shares price to buy several new stocks, including Paramount Global (NASDAQ:PARA), Citigroup (NYSE:C), Chevron (NYSE:CVX) and Occidental Petroleum (NYSE:OXY).
He is spending more money on equities than he has in the last decade. While BRK-B stock has not been immune to the market downturn this year, its share price has declined only 2% compared to a 20% drop in the benchmark S&P 500 index.
However, Berkshire Hathaway has an extremely low price-earnings ratio. Investor and analyst Whitney Tilson of Empire Financial Research has calculated Berkshire Hathaway’s intrinsic value to be $351 per share, which is nearly 20% higher than the $294 that it is currently trading at.
The median price target on BRK-B stock is currently $340, implying 16% upside from current levels. As if to acknowledge how undervalued it feels its share price is right now, Berkshire Hathaway bought back a record amount of its stock last year totaling $27 billion.
Undervalued Large-Cap Stocks: Apple (AAPL)
Apple (NASDAQ:AAPL) stock is trading at around $150. The median price target on AAPL stock is currently $180 a share, with a high estimate of $200. The P/E ratio of 24 times is the lowest it has been in years and the stock pays a dividend that yields 0.61%.
With Apple, investors also get a company that buys back more of its own stock than any other publicly traded concern and is increasingly diversified, venturing into new areas ranging from streaming to buy now, pay later. Apple also remains the world’s leading consumer electronics company with its iPhones and Mac computers.
As with many companies, Apple is dealing with issues that include supply chain constraints, wage inflation and slowing consumer spending in the face of rising interest rates.
AAPL stock took it on the chin after the company announced that it was scaling back production of its new iPhone 14 due to weaker consumer demand than initially forecast. The company’s most-recent earnings report was mixed but managed to beat Wall Street expectations.
Despite a rocky road this year, Apple’s lower share price should make the stock more appealing to value investors.
Additionally, Apple announced its board of directors greenlit a $90 billion share buyback program, which is on top of $85.5 billion in share repurchases last year. Long-term, AAPL stock remains a winner.
Costco (COST)
Shares of big box grocery retailer Costco (NASDAQ:COST) are down 13% year-to-date. At one point this year, the stock was down more than 30% but has managed to recover by demonstrating its sales remain strong despite high inflation and rising interest rates.
The company’s latest quarterly results showed revenue of $72.09 billion, which was above the $72.04 billion that analysts had expected. Earnings per share of $4.20 beat analyst estimates of $4.17 a share.
Perhaps best of all, Costco announced as part of its quarterly print that it will not raise its membership fees this year, holding them at $60 for a regular annual membership and $120 for an executive membership.
A P/E ratio of 39 times looks high at first glance, but investors need to keep in mind that Costco is on track to surpass $200 billion in sales this year, making this one of the more impressive undervalued large-cap stocks to consider.
The company’s stock pays a dividend that yields 0.72%, but Costco has a history of paying out special, one-time dividends as well.
Undervalued Large-Cap Stocks to Buy: American Express (AXP)
Shares of credit card giant American Express (NYSE:AXP) are fresh off a 52-week low and currently trading right around $146 apiece. Down 13% this year, AXP stock is at its most affordable level since the pandemic struck in March 2020.
The stock’s price-to-earnings ratio of 15 times is right around the average of companies listed in the S&P 500 index. It pays a 1.4% quarterly dividend.
With people all over the world traveling and vacationing again, there’s every reason to be bullish on AXP stock and the company’s future earnings.
But don’t take our word for it. Consider that American Express is one of legendary investor Warren Buffett’s favorite stocks. The Oracle of Omaha has held his current position in AXP stock for more than 30 years and never sold a single share.
Besides its traditional credit card loans, American Express also operates an end-to-end payment system that facilitates transactions between consumers and businesses. Revenue from those transactions is today the company’s biggest source of revenue.
On the date of publication, Joel Baglole held long positions in NVDA and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
