No matter what direction market winds blow, investors have an eye for bargains. Taking the plunge on a promising stock at a markdown price can set the stage for stellar returns. Lucky for them, the market has a habit of dishing out these very opportunities. Even a $1,000 budget can pave the way for thriving investments in the trio of undervalued stocks detailed below.
1. Alibaba
Alibaba (NYSE: BABA) has been a rollercoaster for investors ever since its IPO a decade ago. From soaring past $300 per share during the COVID-19 peak to surrendering all the gains, the stock has shed approximately 15% of its value since inception.
Geopolitical tensions and regulatory hurdles have hit Alibaba hard. The uncertainty surrounding its listing status sent shivers down investor spines. Nonetheless, the U.S. and China spared the stock from the delisting guillotine, underscoring its dominance in the Chinese retail and cloud sectors.
Despite the stock slump, Alibaba’s net income has tripled, climbing from 23 billion renminbi in fiscal 2014 ($3.2 billion) to 71 billion renminbi ($9.9 billion) in fiscal 2024. Coupled with a noteworthy P/E ratio of 18, significantly lower than Amazon and MercadoLibre, Alibaba’s resilience appeals to many investors.
2. Carnival
Carnival Corp. (NYSE: CCL) weathered stormy seas lately, with the pandemic crippling operations for over a year. But with a return to cruise routes in mid-2021 and a surge in bookings, Carnival looks set to sail to pre-pandemic revenue heights.
Although laden with over $30 billion in debt accumulated during the crisis, Carnival’s short-term debt of $2.2 billion is manageable, given the $2.7 billion free cash flow generated in the past six months. With a P/E ratio of 22 and a balance sheet on the mend, Carnival’s prospects are charting a course for brighter days.
3. Roku
Roku (NASDAQ: ROKU) tested investor patience post the 2022 market plunge. Despite sustained viewer growth on its platform and a unique position in the streaming domain, Roku struggles to turn a profit. Nevertheless, a healthy $318 million quarterly free cash flow suggests financial stability beyond the reported losses.
The stagnant growth in average revenue per user (ARPU) raises concern, but at a price-to-sales ratio of 2, significantly down from its pandemic peak, Roku’s potential shines bright. A return to profitability could catapult Roku to lofty valuations in the future.
Is Alibaba the One for You?
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