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With the U.S. stock market up double digits in 2023 and the S&P 500 Index ($SPX) hovering near all-time highs, it remains undervalued and undervalued, especially in the tech sector that served as the torch bearer. Finding stocks may seem difficult. What the rally will look like in 2023.
Additionally, at least some in the market believe stock valuations are a bit stagnant after the incredible stock rally in 2023, but to be honest, many analysts didn’t expect this. Ta. However, the combination of the resilience of the US economy, continued decline in inflation, and dovish signals from the Fed could give the bulls an advantage over the bears in 2023 after losing last year.
I think PayPal Holdings (PYPL) and Alibaba Group (BABA) are two cheap stocks with the potential for a rebound in 2024. Both stocks have now underperformed for three consecutive years, with Alibaba stock trading just above its 2014 IPO price. Here’s why both of these stocks look like good buys in 2024.
PayPal has had another disappointing year
PayPal stock will end 2023 in the red, marking the third consecutive year the fintech giant has posted negative profits. There are certainly reasons to be pessimistic about PayPal. The company’s revenue growth is slowing, while profit margins are shrinking due to intensifying competition from companies such as Apple Pay. The company’s number of active users is also decreasing, even though the number of transactions per account is increasing.
PayPal faces several headwinds, including a slowdown in e-commerce sales. However, with a trailing 12-month (NTM) price-to-earnings (PE) multiple of 11.6x, PayPal appears to be quite cheap and undervalued, with a likely recovery in 2024.
The company is focused on future profitable growth and is increasing share buybacks. In its Q3 2023 earnings call, PayPal noted that the company has repurchased 7% of its outstanding shares over the past eight quarters. All else being equal, aggressive share buybacks should help boost PayPal’s earnings per share.
PayPal Stock Price 2024 Prediction
Analysts rate PayPal stock as a “moderate buy,” and 17 out of 36 analysts interviewed rate it as a “strong buy.” One analyst rates PYPL as a “moderate buy” and the remaining 18 analysts rate it as a “hold.” The average price target for the stock is $74.57, representing about 21.5% above the current price level.
Despite the pure BNPL name Affirm (AFRM) delivering multibagger gains in 2023, I think the market has yet to reward PayPal’s BNPL (buy now, pay later) business. is thinking. Overall, I think PayPal stock is cheap and undervalued. Buy stocks that are undervalued even though the overall market is trading near all-time highs.
Alibaba stock looks pretty cheap at this price level.
It’s hard to talk about undervalued stocks without mentioning Chinese tech giant Alibaba. The e-commerce giant’s stock hasn’t made investors rich since going public, and it faces a range of challenges at both a macro and company-specific level.
To begin with, Alibaba stock has been trading at a single-digit NTM PE multiple since September 2022, and the current multiple is hovering at just over 8x, making Alibaba seem like a “value trap.” Maybe. It’s almost impossible to find blue-chip U.S. tech stocks trading at such low multiples.
However, thanks to China’s recent shift to a more controlled economy and continued crackdown on tech companies (as exemplified by the latest gaming regulations), valuations for Chinese stocks have fallen in a positive direction. And on a macro level, Alibaba continues to face intense competition from the likes of PDD Holdings (PDD). In addition to Pinduoduo, PDD Holdings also owns Temu, a very popular shopping app.
Alibaba is restructuring its business into six divisions and is considering listing them to create shareholder value. But those efforts were dashed last month when the company called off an IPO for its cloud business. The company has been undergoing frequent changes in top management, but these have not done much to restore trust.
Is Alibaba stock worth buying in 2024?
Alibaba spends billions of dollars on share buybacks, buying back $1.7 billion worth of shares in the September quarter and has another $14.6 billion remaining in its current buyback plan. It also started paying a dividend, and while many tech investors see it as a sign that the company lacks future growth opportunities, I believe this is a step in the right direction.
Alibaba’s slowing growth is not surprising, but it appears to be significantly undervalued and undervalued at its current valuation. The stock is past its re-rating deadline, and restructuring progress, along with Ant Financial’s eventual listing, could ultimately be the driving force behind BABA’s stock rally.
Wall Street analysts are also quite bullish on BABA, with a consensus rating of “Strong Buy” from the 14 analysts who cover the stock.
Notably, BABA stock is trading below its lowest street price target of $90, while its highest street price target of $150 is nearly double its current price.
Chinese stocks are expected to rebound in 2024, and China-focused ETFs could be a good investment heading into 2024. In the Chinese tech industry, I think Alibaba is one of the better value stocks to buy, especially for patient investors looking for an undervalued reversal. candidate.
As of the date of publication, Mohit Oberoi held positions at BABA, PYPL, and AFRM. All information and data in this article is for informational purposes only. For more information, please see his Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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