While markets remain up on the year, not every stock has shared in the gains. There are many securities that have fallen over the last eight months, and fallen hard. Plus, some stocks continue to have attractive valuations despite posting big increases this year.
Few if any stocks have tested new highs following the bear market of 2022. This is all good news for investors as it means that people can buy stocks that are either attractively valued or undervalued. Many stocks have only gotten more attractively valued in recent weeks due to the market downturn experienced in August.
Taking positions in solid stocks now when they are down or still fairly valued should lead to big gains once the market catches up and the share prices inevitably rise. While it may take some time for certain securities to turnaround, there are bargains to be found for investors who can exercise some patience.
Here are three very oversold growth stocks to buy right now.
Nvidia (NVDA)
It might be difficult to think of a stock that has gained nearly 240% this year as undervalued, but shares of Nvidia (NASDAQ:NVDA) are now trading at their lowest forward earnings multiple in eight months. The lower valuation is due to analysts across Wall Street raising their estimates for Nvidia’s future earnings, leading to a drop in the price-earnings (P/E) multiple at which Nvidia’s stock is now trading. Analysts now expect Nvidia’s revenue for the fiscal year ending in January 2024 to reach $53 billion, nearly double the previous year.
Nvidia’s stock is now trading at the equivalent of around 33 times expected earnings over the next 12 months, according to Refinitiv data. That’s down from a P/E ratio of 46 just one week ago and is the lowest level since December 2022. Analysts upward revisions to Nvidia’s future earnings come after the company raised its forward guidance, saying it expects revenues to rise 170% from a year earlier in the current third quarter driven by demand for their artificial intelligence chips.
Additionally, Nvidia has announced that it plans to buyback $25 billion of its own shares, suggesting that the company views its stock as undervalued despite more than tripling year to date.
Chipotle Mexican Grill (CMG)
Down 13% from a 52-week high reached in late July ahead of its second-quarter financial results, Chipotle Mexican Grill (NYSE:CMG) looks like a buy at current levels. While the quick-service restaurant chain is not a high-flying technology company, its stock has been a long-term growth story, having increased 300% over the last five years and nearly 4,500% since going public in 2006. Buying CMG stock on post-earnings weakness is likely a smart move for investors who play the long game.
Chipotle’s Q2 print wasn’t that bad. It certainly doesn’t justify CMG stock being down more than 10%. The company reported Q2 EPS of $12.65, which was better than the $12.31 expected among analysts. Revenue in the quarter totaled $2.51 billion, which was only slightly below the consensus expectation of $2.53 billion. Also, Chipotle’s operating margins grew to 27.5% in Q2 from 25.2% a year ago.
The selloff in CMG stock has been due to the company’s forward guidance, which came in lighter than Wall Street anticipated. The company noted that higher prices for tortillas, dairy, beef, and other ingredients are likely to pressure profits in the near-term. Regardless, Chipotle and its stock are likely to remain a growth story over the long-term.
PayPal (PYPL)
If there’s one tech stock that looks heavily oversold right now, it is financial technology giant, PayPal (NASDAQ:PYPL). The company’s stock is currently trading only slightly above its 52-week low, having fallen 33% over the last 12 months, including a 16% pullback so far in 2023. Trading at 17 times future earnings, PYL stock looks cheap compared to many other tech stocks that trade at multiples that are two or three times higher. Currently bouncing off its 52-week low, now might be an advantageous time to take a position in PayPal stock.
PYPL stock slumped 8% after the company posted its Q2 results in early August. The decline came despite PayPal announcing earnings that were in line with analysts’ consensus forecasts, with the online payments company reporting EPS of $1.16. Revenue came in higher than Wall Street expectations at $7.29 billion versus estimates of $7.27 billion. Yet, despite the decent numbers, PayPal’s shares sank. On a positive note, the company recently got a new CEO in Alex Chriss, who previously ran the small business group at Intuit (NASDAQ:INTU).
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
