7 Undervalued Nasdaq-100 Stocks for Bargain Hunters
Understandably, with the innovation sector printing a remarkable performance, all eyes have centered on Nasdaq-100 stocks. Indeed, on a year-to-date basis, the index shot up about 52%. That’s almost double the performance of the benchmark S&P 500. And that’s not a bad run for the S&P given the circumstances. Typically, though, higher performance comes with an overvalued profile.
Still, with so many securities available, a few tend to be overlooked, segueing into bargain Nasdaq-100 stocks. To be sure, these ideas represent the best of the best in the technology ecosystem. So, we’re not talking about ridiculously low valuations. However, if you’re the type that doesn’t like to pay full retail, these ideas should be attractive.
Plus, even the Federal Reserve is laying the possible groundwork for a tech rally. Policymakers hinted at interest rate cuts next year. If that happens, you may want to consider risk-on assets. And these undervalued Nasdaq-100 stocks may reach a greater distance.
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Qualcomm (QCOM)
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What it is: Based in San Diego, California, Qualcomm (NASDAQ:QCOM) creates semiconductors, software, and services related to wireless technology. It owns a myriad of patents that are critical to the 5G rollout.
Relevance: While QCOM has been one of the more frustrating tech juggernauts, it has recently come alive. Nevertheless, a case can be made that it’s still one of the Nasdaq-100 stocks because of its broad reach. For instance, the 5G chipset market reached a valuation of $13.26 billion in 2020. Further, experts project that by 2030, the segment could be worth over $92 billion. That would come out to a compound annual growth rate (CAGR) of 21.85%.
Pros: Even with the reliable financial performance of QCOM, it’s undervalued. Specifically, shares trade at only 15.62x forward earnings. In contrast, the sector median comes in at 23.34x. Also, analysts rate QCOM a moderate buy with a high-side target of $160.
Cons: Because shares have jumped so quickly in recent sessions, analysts on average see muted upside potential.
KLA Corp (KLAC)
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What it is: Headquartered in Milpitas, California, KLA Corp (NASDAQ:KLAC) is a capital equipment company. Per its public profile, it supplies process control and yield management systems for the semiconductor industry and other related nanoelectronics industries.
Relevance: Fundamentally, KLA Corp benefits from a relevant and burgeoning niche in the broader semiconductor ecosystem. According to Business Research Insights, the semiconductor process control equipment market reached a valuation of $8.29 billion last year. Further, experts project that the segment could hit a value of just over $13 billion by 2028. If so, that would come out to a CAGR of 7.9% during the forecast period.
Pros: KLA makes a compelling case for bargain Nasdaq-100 stocks thanks to its overall financial print. Right now, it posts a three-year revenue growth rate of 26.8% and an impressive net margin of 30.51%. Both stats run well above the underlying sector averages. Nevertheless, KLAC also trades at a price/earnings-to-growth (PEG) ratio of 0.85x. In contrast, the sector median comes in at 1.46x.
Cons: While analysts peg shares a moderate buy, the average price target lands at only $585.42.
Applied Materials (AMAT)
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What it is: Hailing from Santa Clara, California, Applied Materials (NASDAQ:AMAT) bills itself as the leader in materials engineering solutions. The company’s products and services integrate into virtually every new chip and advanced display in the world.
Relevance: Fundamentally, what makes AMAT a compelling idea for undervalued Nasdaq-100 stocks is relevance to the core industry. According to Market Research Future, the global semiconductor materials market size reached a valuation of just over $59 billion in 2022. Further, experts project that the sector will expand at a CAGR of 4.6% from 2023 through 2030. At the culmination point, the industry should be worth $60.34 billion.
Pros: On paper, it’s difficult to argue that AMAT isn’t one of the bargain Nasdaq-100 stocks. Again, you have the relevance. Second, the financials are solid: 19% three-year revenue growth rate and robust margins across the board. On top of that, you get the bonus of a trailing-year earnings multiple of 19.35X. That’s below the sector median of 26.63X.
Cons: It’s a strong consensus buy but as one of the top-tier Nasdaq-100 stocks, the average price target of $165.72 implies limited upside.
Constellation Energy (CEG)
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What it is: Based in Baltimore, Maryland, Constellation Energy (NASDAQ:CEG) is the nation’s largest producer of carbon-free energy and provides sustainable solutions to homes, businesses, and public-sector customers across the continental U.S. Per its website, its energy resources stem include wind, solar, hydroelectric and nuclear.
Relevance: Obviously, the key for CEG as one of the undervalued Nasdaq-100 stocks centers on the relevance of the business. To put it into numbers, the global renewable energy market size will come out to $1.21 trillion at year’s end. Plus, the sector will expand at a CAGR of 17.2% from 2024 to 2030. Again, that’s the global figure, whereas Constellation focuses on the continental U.S. Still, it gives you an idea of the opportunity.
Pros: As a diversified energy producer, Constellation fundamentally benefits from effectively permanent relevance. Thus, it enjoys consistency in its business. Still, CEG trades at only 1.46x trailing-year revenue. In contrast, the sector median comes in at 2.47x.
Cons: To be fair, the rest of Constellation’s financials aren’t exactly sterling. Also, CEG has already moved up so strongly this year.
Regeneron (REGN)
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What it is: Headquartered in Tarrytown, New York, Regeneron (NASDAQ:REGN) is one of the top-tier biotechnology firms. Originally, the company focused on neurotrophic factors and their regenerative capabilities, thus explaining its corporate name.
Relevance: Currently, one of Regeneron’s main focus is leveraging antibodies as therapeutics. And it doesn’t get much bigger of an arena when it comes to biotech firms. According to MarketsandMarkets, the global antibody therapeutics market will print sales of $247.3 billion at year’s end. Further, experts project that the segment will expand at a CAGR of 14.1% by 2028. At the forecast culmination, the industry could be worth $479 billion.
Pros: Financially, the company prints a three-year EBITDA growth rate of 25.8%, beating out nearly 74% of its peers. It also enjoys consistent profitability, helped by excellent operating and net margins. Even with these attributes, REGN trades for only 24x trailing-year earnings. That compares favorably to the sector median of 32.44x, making it one of the bargain Nasdaq-100 stocks.
Cons: REGN is a slow-and-steady mover so if you’re looking for blistering returns, this isn’t it.
Comcast (CMCSA)
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What it is: Calling Philadelphia, Pennsylvania home, Comcast (NASDAQ:CMCSA) is the largest American multinational telecommunications and media conglomerate per its public profile. It features a massive profile of broadcasting and cable television along with an internet service provider business.
Relevance: One could make jokes about the cord-cutting situation and you wouldn’t be wrong. However, unless you envision a future where there’s no television being watched and no Internet being used, Comcast commands permanent relevance. Plus, under the company umbrella, Comcast owns a rich entertainment portfolio. These factors should help keep the money flowing, even if it’s not the most exciting idea among undervalued Nasdaq-100 stocks.
Pros: For those willing to be a bit adventurous, CMCSA brings a solid financial profile to the table. Its three-year revenue growth rate of 5.1% isn’t spectacular but it’s definitely above average for the sector. Also, it’s consistently profitable thanks to strong margins across the board. And finally, it only trades for a forward multiple of 10.33x, lower than 67% of its rivals.
Cons: CMCSA is going through a frustrating sideways consolidation since late July.
Charter Communications (CHTR)
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What it is: Based in Stamford, Connecticut, Charter Communications (NASDAQ:CHTR) is a telecommunications and mass media. It offers services under the brand Spectrum. Per its public profile, it features over 32 million customers in 41 states, making it the second-largest cable operator in the U.S., just behind Comcast.
Relevance: At first glance, CHTR might not seem like a particularly relevant example of bargain Nasdaq-100 stocks. However, it’s important to note that the TV and video market in the U.S. will print revenue of $275.7 billion by year’s end. Further, according to Statista, experts project that the sector will expand at a CAGR of 3.01%. By 2028, market volume should hit $319.8 billion.
Pros: Over the past three years, Charter’s revenue clocked in at 17.1%, beating out nearly 84% of its peers. Also, it enjoys a very strong operating margin of 22.8%. Enticingly, CHTR trades at only 9.92x forward earnings. In contrast, the sector median stands at 13.18x. Finally, analysts rate shares a moderate buy with a $456.18 average price target.
Cons: Growth has been slowing in recent quarters so it’s something to watch carefully.
On the date of publication, Josh Enomoto 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.
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