The S&P 500 got off to a hot start in 2023, but it has lost ground in recent weeks amid growing macroeconomic uncertainty.
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Rising interest rates and concerns about a banking crisis and potential U.S. recession have weighed on high-risk stocks, but broad market weakness has hurt the share prices of many high-quality value stocks as well. Fortunately for investors, that weakness has also created some compelling value opportunities.
If the Federal Reserve can avoid a hard landing for the economy, these value investing opportunities likely won't last for long. Here are seven undervalued stocks to buy with forward earnings multiples under 15, according to CFRA Research.
JPMorgan Chase & Co. is one of the world's largest banks and financial services companies, with roughly $3.7 trillion in assets. A string of recent bank failures has investors concerned about the stability of the financial sector. In early May, JPMorgan stepped in to acquire First Republic Bank after it failed and was seized by the Federal Deposit Insurance Corp., or FDIC. Analyst Kenneth Leon is bullish on the First Republic takeover and says JPMorgan is acquiring a "clean bank." CFRA has a "buy" rating and $160 price target for JPM stock, which closed at $136.05 on May 11.
Broadcom is a diversified global analog semiconductor supplier. Analyst Angelo Zino says Broadcom has growing opportunities in cloud services. He is also bullish on the pending acquisition of VMware Inc. (VMW), a deal which is being heavily scrutinized by regulators. Zino says VMware's software business would help diversify Broadcom's model and contribute high-visibility, high-margin recurring revenue. He anticipates improving network demand for custom switching and routing platforms, as well as application-specific integrated circuit solutions. Zino projects 7.6% revenue growth for Broadcom in fiscal 2023. CFRA has a "buy" rating and $680 price target for AVGO stock, which closed at $627.67 on May 11.
Bank of America is one of the largest U.S. commercial and investment banks and wealth management services providers. Leon says Bank of America is firing on all cylinders, and both lending and investment banking demand will rebound in the second half of 2023. He says nearly 90% of rate sensitivity to the bank's loans is driven by short rates, and Bank of America reported 6.4% total loan growth in the first quarter. Leon is bullish on the bank's leading market share in retail deposits from consumers and small businesses. CFRA has a "buy" rating and $41 price target for BAC stock, which closed at $27.39 on May 11.
Pfizer is one of the largest global pharmaceutical companies. In the past two years, Pfizer has gotten plenty of headlines and sales from its COVID-19 vaccine and booster shots, which it jointly developed with partner BioNTech SE (BNTX). However, the stock is down 25.2% year-to-date in 2023, the worst performance on this list. Analyst Sel Hardy says the sell-off is a buying opportunity for long-term value investors, and she expects new product launches will drive a recovery in non-COVID-19 sales growth in the second half of the year. CFRA has a "buy" rating and $48 price target for PFE stock, which closed at $37.58 on May 11.
Cisco Systems specializes in networking, security, collaboration, cloud computing and other technologies. Analyst Keith Snyder says components shortages are near-term headwinds for Cisco, but 5G core deployments and Wi-Fi 6 upgrades will support long-term demand. Snyder says Cisco will be a major beneficiary from a sharp rise in bandwidth consumption, an ongoing shift to cloud networking and a growing demand for data center solutions. In addition, he says Cisco's strong balance sheet facilitates acquisitions, dividends and buybacks. He projects 9.7% revenue growth in fiscal 2023. CFRA has a "strong buy" rating and $60 price target for CSCO stock, which closed at $46.37 on May 11.
Comcast is a media conglomerate with a diversified portfolio of cable and broadcast television assets, including NBCUniversal, the Peacock streaming service and Universal Films. Comcast shares are up 17.2% year to date, the best performance of any stock on this list. Snyder says Comcast's diversification helps reduce risk in an economic downturn, and its advertising, theme park, and TV and film businesses have all benefited from pent-up demand. Snyder says Comcast should maintain a return on invested capital in at least the high-single-digit range in coming years. CFRA has a "buy" rating and $50 price target for CMCSA stock, which closed at $40.37 on May 11.
Wells Fargo is another one of the largest U.S. banks, and it has a mostly domestic loan portfolio. Of all the value stocks on this list, Wells Fargo's forward earnings multiple of 8.3 is the lowest. Leon says Wells Fargo is positioned for profitable growth, and the bank's restructuring has helped generate much-needed earnings momentum. He says the company's small- and midsize-business commercial loan portfolio is performing well, and its impressive credit-risk management makes it a relatively stable investment in an unstable banking environment. CFRA has a "buy" rating and $50 price target for WFC stock, which closed at $38.33 on May 11.
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