Top 3 undervalued stocks with strong upside in 2022

By:
on Jan 5, 2022
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  • American stocks did well in 2021 as the S&P 500 rose by 28%.
  • Most stocks have pricey valuations, with the S&P 500 having a PE of 29.
  • We look at top stocks like PayPal, Boeing, and Activision Blizzard that have an upside.

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US stocks recorded strong gains in 2021, with the S&P 500 index rising by 28%. As a result, this performance left many stocks being highly overvalued. For example, the S&P 500 has a PE ratio of about 29, the highest it has been since 2011. Still, beneath the surface, some stocks are actually undervalued. Here are the top 3 most undervalued stocks that could do well in 2022.

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PayPal

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The PayPal (NASDAQ: PYPL) stock price has struggled in the past few months as investors worry about the company’s growth. The talk of the Pinterest acquisition pushed more investors to exit the stock since they judged that it was a desperate move to accelerate growth.

The PayPal stock sits close to a 52-week low after falling by 40% from its highest point in 2021. Still, there is a possibility that the stock will bounce back in 2022. For one, the company’s valuation has dropped dramatically, considering that the stock has a PE ratio of about 45, which is lower than its historical average.

Also, while its business has slowed recently, it is still growing at a healthier pace. For example, analysts expect that the company’s revenue in 2021 was $25.23 billion in 2021. If confirmed, that will be a bigger increase than the $21 billion it generated in 2020. The company’s revenue will also rise to $30 billion this year.

Boeing

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Boeing (NYSE: BA) is a leading aircraft manufacturer and defense contractor that has gone through a rough patch in the past few years. The company has faced challenges with its MAX plane that led to a grounding of the plane. It has also been investigated because of the challenges with its Dreamliner plane.

The Boeing stock price has lagged the S&P 500 in the past 12 months. It has risen by just 5% while the blue-chip index rose by 28%. It has also declined by 32% in the past three years, making it one of the most undervalued stocks.

There are several catalysts for the Boeing stock price. The company has restarted shipping the MAX planes, meaning that it is solving some of its challenges. Second, there is increased demand for both civil aviation and military products. Finally, the stock is undervalued and analysts expect that it will rise by 26.1%. 

Activision Blizzard

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Activision Blizzard (NASDAQ: ATVI) is a leading game company known for titles like Call of Duty, Gun, and Spider-Man.

The Activision Blizzard stock price crashed by about 35% from its 2021 high as the company was accused of sexual harassment. The company also faced significant competition from the likes of Epic and Ubisoft. 

This decline means that the ATVI stock is highly undervalued. I suspect that it will rebound as investors move past its PR challenges. Analysts expect that it will rise by36%.

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