Morningstar created a roster of the most undervalued stocks among the ones to which it assigns a wide moat.
With the S&P 500 index having dropped 22% this year, investors may be looking for buying opportunities in the stock market.
Morningstar put together a list of the most undervalued stocks among the ones to which it assigns a wide moat.
Undervaluation is calculated relative to Morningstar analysts’ estimates of fair value for the stocks.
And Morningstar gives wide moats to companies it thinks have significant advantages that enable them to successfully fend off competitors for decades.
Here is Morningstar’s list in order of how undervalued the stocks were as of Sept. 27.
1. Meta Platforms (META) – Get Meta Platforms Inc. Report, the parent of social-media giant Facebook. Discount of stock price to Morningstar’s fair value estimate: 61%
2. Teradyne (TER) – Get Teradyne Inc. Report, an automatic test equipment maker. Discount to fair value: 53%.
3. Comcast (CMCSA) – Get Comcast Corporation Class A Common Stock Report, the media/telecommunications titan. Discount to fair value: 50%.
4. Lam Research (LRCX) – Get Lam Research Corporation Report, a semiconductor-manufacturing-equipment maker. Discount to fair value: 48%.
5. Equifax (EFX) – Get Equifax Inc. Report, the credit-reporting firm. Discount to fair value: 47%.
6. Boeing (BA) – Get The Boeing Company Report, the aereospace giant. Discount to fair value: 46%.
6. Etsy (ETSY) – Get Etsy Inc. Report, the arts-and-crafts online retailer. Discount to fair value: 46%.
8. ServiceNow (NOW) – Get ServiceNow Inc. Report, a business software company. Discount to fair value: 44%.
9. MercadoLibre (MELI) – Get MercadoLibre Inc. Report, an Argentine e-commerce company. Discount to fair value: 43%
9. Polaris (PII) – Get Polaris Inc. Report, a recreational vehicle company. Discount to fair value: 43%.
Morningstar’s Take on Meta Platforms…
“Meta is the largest social network in the world, with nearly 3 billion monthly active users,” Morningstar analyst Ali Mogharabi wrote in a commentary.
“The growth in users and user engagement, along with the valuable data that they generate, makes Meta’s platforms attractive to advertisers.
“The combination of these valuable assets and our expectation that advertisers will continue to shift their spending online bodes well for the firm’s top-line growth and cash flow.”
“We’re shaving our fair-value estimate for Teradyne to $167 per share from $172 previously, in the wake of poor second-half guidance that reflects a souring macroeconomic environment,” Morningstar analyst William Kerwin wrote in July. The stock recently traded at $78.
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“Nonetheless, we believe Teradyne’s long-term fundamentals are resolute, and it remains one of our top picks in the tech sector,” he said.
“Teradyne is a heavyweight supplier of automated test equipment for semiconductors, boasting market-leading capabilities that run the gamut of chips.”
…and on Comcast
“Comcast’s core cable business, which accounts for more than half of the firm’s value, enjoys significant competitive advantages, but will likely see growth slow as competition for incremental customers heats up,” wrote Morningstar analyst Michael Hodel.
“NBCUniversal isn’t as well positioned but holds unique assets, including core content franchises and theme parks, that should help the transition away from the traditional television business.
“Overall, we expect Comcast will deliver modest growth with strong cash flow for the foreseeable future.”