Blue-chip stocks tend to carry less risk than micro-cap stocks. Investing in established corporations with vast moats and plenty of recognition can lead to steady gains in the long run.
Some household names are better than others, and investors can find several opportunities that feature undervalued blue-chip stocks. These stocks offer a higher margin of safety than most publicly traded corporations. Furthermore, each of these companies is still displaying solid growth numbers. These aren’t companies that have high yields and limited upside. Each undervalued blue-chip stock on this list has the potential to outperform the S&P 500.
Investors should look for companies that deliver rising revenue and solid net profit margins. Dividends are a nice bonus but are not required for good investments. Luckily, each of the undervalued blue-chip stocks on this list has a dividend, so you’ll receive cash flow just for holding onto your shares. Wondering which blue-chip stocks present buying opportunities? These are some of the top picks to consider.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) has been crushing the stock market. Shares are up by 52% year-to-date and have gained 162% over the past five years. Despite the impressive rally, Meta Platforms only trades at a 29 P/E ratio.
The company has done wonders in improving its profit margins. Net income more than doubled year-over-year (YOY) in the first quarter, but that didn’t come at the cost of revenue growth. Meta Platforms improved its top line by 27% YOY. The social media giant reduced its headcount by 10% YOY while achieving those results.
Meta Platforms makes most of its revenue from ads, and the company demonstrates solid growth in this area. Ad impressions increased by 20% YOY, while the average price per ad jumped by 6% YOY. META also closed the quarter with 3.24 billion daily active users, a 7% YOY increase. More advertisers are using the platform and have more people who can see their ads. That translates into big profits for Meta Platforms and its shareholders.
American Express (AXP)
American Express (NYSE:AXP) trades at an even lower P/E ratio than Meta Platforms. Investors can accumulate AXP stock at a 19 P/E ratio. The fintech firm also offers a 1.17% yield. Shares are up by 28% year-to-date and have gained 86% over the past five years.
The credit and debit card issuer has double-digit profit margins and is winning over younger generations. Investors saw those catalysts unfold in the latest quarter. American Express reported 11% YOY revenue growth in Q1 2024. Net income jumped by 34% YOY. The company remains on track to achieve 9% to 11% YOY revenue growth and EPS growth in the mid-teens beyond 2026.
American Express has maintained a high dividend growth rate for several years, including a 17% dividend hike earlier this year. Wall Street analysts have rated the stock as a Moderate Buy. The highest price target of $285 per share suggests the stock can gain an additional 19% from current levels.
Walmart (WMT)
Walmart (NYSE:WMT) has been offering cheaper prices on a wide range of goods and services for more than 60 years. The Arkansas-based company has endured many economic cycles while delivering solid returns for its investors. Shares are up 34% year-to-date and have gained 84% over the past five years. Walmart offers a 1.18% yield, and the company raised its dividend by 9% earlier this year. That’s the highest growth rate in more than a decade.
Earnings continue to look strong as the company posted 6.0% YOY revenue growth in the first quarter of fiscal 2025. Global e-commerce and advertising sales were big winners, up 21% and 24% YOY, respectively. Walmart also reported a 22.4% YOY improvement in its adjusted earnings per share.
The stock has received an average price target that implies a 5% upside. The highest price target of $81 per share suggests Walmart can rally by an additional 15%. Walmart is currently rated as a Strong Buy.
On the date of publication, Marc Guberti did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
