Wall Street's fear gauge, the CBOE Volatility Index (VIX), has climbed 78.8% year-to-date on investors’ growing concerns about issues that include high inflation, supply chain disruptions, and a likely recession due to the Federal Reserve’s hawkish stance. This has caused the markets to suffer immense selloffs over the past few weeks.
The major benchmark indexes saw a recovery yesterday on President Biden’s announcement regarding the easing of tariffs on China, but lingering issues make the market susceptible to further pullbacks. Since the market is expected to absorb the risks gradually, long-term investors should grab this opportunity and bet on fundamentally sound stocks trading at very reasonable prices.
We think the shares of Qualcomm Incorporated (QCOM), FedEx Corporation (FDX), A.P. Møller - Mærsk A/S (AMKBY), STMicroelectronics N.V. (STM), and Agilent Technologies, Inc. (A), which possess great upside potential but look undervalued at their current price levels, could be solid bets now.
Qualcomm Incorporated (QCOM)
QCOM in San Diego, Calif., is a multinational semiconductor and telecommunications equipment company that develops and delivers products and services based on code-division multiple access (CDMA) technology used in digital wireless communications equipment and satellite ground stations. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On May 23, 2022, QCOM introduced QCA7006AQ, a next-generation powerline communication (PLC) device designed to address EV charging station communications needs that use a global Combined Charging System (CCS). Compliant with the HomePlug Green PHY (HPGP) specification that implements Vehicle-to-Grid (V2G) systems, the QCA7006AQ supports an Ethernet digital interface, in addition to Serial Peripheral Interface (SPI), the AEC-Q100 Grade 2 compliance, and the HPAV operation mode. These features should enable QCOM to witness wider recognition across the auto industry.
QCOM’s non-GAAP revenues for its fiscal year 2022 second quarter, ended March 27, 2022, increased 40.8% year-over-year to $11.16 billion. The company’s non-GAAP operating income came in at $4.37 billion, up 63.7% from the year-ago period. QCOM’s non-GAAP net income came in at $3.66 billion, representing a 67.6% rise from the prior-year period. Its non-GAAP EPS was $3.21, indicating a 69% year-over-year improvement. As of March 27, 2022, the company had $7.17 billion in cash and cash equivalents.
Analysts expect the company’s EPS to improve 47.4% year-over-year to $12.59 for its fiscal 2022 ending Sept. 30, 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters The $44.67 billion consensus revenue estimate for the same fiscal year represents a 33.5% rise from the prior-year period. The company’s EPS is expected to grow at a 14.3% rate per annum over the next five years.
Over the past three years, QCOM’s revenue, EBITDA, and total assets have grown at CAGRs of 22.8%, 40.6%, and 9.2%, respectively. The stock’s 0.61x non-GAAP forward PEG is 54.9% lower than the 1.35x industry average. In terms of forward Price/Cash Flow, QCOM is currently trading at 11.72x, which is 29.3% lower than the 16.56x industry average. The stock has declined 0.5% in price over the past month to close yesterday’s trading session at $132.12, down 32% from its 52-week high of $193.58.
QCOM’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Growth, Quality, Value, and Sentiment. Click here to see the additional ratings for QCOM’s Value, Stability, and Momentum.
QCOM is ranked #6 of 95 stocks in the B-rated Semiconductor & Wireless Chip industry.
Note that QCOM is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.
Click here to checkout our Semiconductor Industry Report for 2022
FedEx Corporation (FDX)
Mem[his, Tenn.-based FDX provides a portfolio of transportation, e-commerce, and business services through companies competing collectively and operating independently under the FedEx brand. The company's segments include FedEx Express; FedEx Ground; FedEx Freight; FedEx Services; and Other and Eliminations. It provides worldwide express delivery, ground small-parcel delivery, less-than-truckload freight delivery, supply chain management services, customs brokerage services, trade facilitation, and electronic commerce solutions.
On Dec. 9, 2021, FDX’s subsidiary FedEx Express transportation company, and Delhivery, an Indian logistics and supply chain company, announced the completion of a strategic alliance transaction that unlocks FedEx Express’ cross-border potential in India. This transaction combines the FedEx global network with Delhivery’s extensive pan-India network and technology solutions to provide innovative services and solutions that aim to improve speed, efficiency, and access for FedEx and Delhivery customers.
For its fiscal 2022 third quarter, ended Feb. 28, 2022, FDX’s revenues increased 9.9% year-over-year to $23.64 billion. The company’s non-GAAP operating income came in at $1.46 billion for the quarter, indicating a 37.4% year-over-year improvement. Its non-GAAP net income was $1.22 billion, representing a 29.6% rise from the prior-year period. And FDX’s non-GAAP EPS increased 32.3% year-over-year to $4.59. The company had $6.07 billion in cash and equivalents as of Feb. 28, 2022.
Analysts expect the company’s EPS to hit $20.62 for its fiscal year 2022, ending May 31, 2022, representing a 13.5% rise from the prior-year period. The $93.63 billion consensus revenue estimate for the same fiscal year represents an 11.5% year-over-year improvement. Its EPS is expected to grow at the rate of 19.3% per annum over the next five years.
Over the past three years, the company’s revenue, EBITDA, and total assets have grown at CAGRs of 9.8%, 10.6%, and 15.6%, respectively. FDX’s 0.75x non-GAAP forward PEG is 43.8% lower than the 1.33x industry average. In terms of forward Price/Cash Flow, FDX is currently trading at 5.80x, which is 55.7% lower than the 13.10x industry average. The stock has declined 0.3% in price over the past month to close yesterday’s trading session at $204.69, down 37.2% from its 52-week high of $319.90.
FDX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Value, Quality, and Sentiment. Click here to see the additional ratings for FDX (Momentum and Stability).
FDX is ranked #4 of 17 stocks in the A-rated Air Freight & Shipping Services industry.
A.P. Møller - Mærsk A/S (AMKBY)
Based in Copenhagen, Denmark, AMKBY is an integrated transport and logistics company worldwide. The company offers container vessels, supply ships, special vessels, terminals, tugboat activities, and reefer container box manufacturing through its Ocean, Logistics & Services, and Terminals segments.
On May 23, 2022, OBE Organic, Australia’s oldest organic beef exporting company and the first refrigerated meat exporter in Oceania to vastly lower the ocean emissions of its North America exports, announced that it will take further steps to reduce its carbon footprint with AMKBY’s low emission ECO Delivery product, which reduces CO2 emissions by more than 80%. The cooperation is another milestone for AMKBY in decarbonizing shipping operations in Oceania and should help it witness increasing growth for this solution in the coming years.
For its fiscal 2022 first quarter, ended March 31, 2022, AMKBY’s revenue increased 55.1% year-over-year to $19.29 billion. The company’s EBITDA came in at $9.08 billion, up 124.9% from the prior-year period. Its net profit was $6.81 billion for the quarter, indicating a 150.6% rise from the year-ago period. AMKBY’s EPS was $363, representing a 161.2% rise from the prior-year period. The company had $12.08 billion in cash and cash equivalents as of March 31, 2022.
The $76.04 billion consensus revenue estimate for its fiscal 2022, ending Dec. 31, 2022, represents a 23.1% rise from the year-ago period. Over the past three years, the company’s revenue, EBITDA, and total assets have increased at CAGRs of 20.2%, 84.5%, and 5.8%, respectively.
The stock’s 2.45x non-GAAP forward P/E is 84.5% lower than the 15.83x industry average. In terms of forward Price/Cash Flow, AMKBY is currently trading at 1.97x, which is 84.9% lower than the 13.10x industry average. And over the past month, the stock has gained 8% in price to close yesterday’s trading session at $14.78, down 22.8% from its 52-week high of $19.14.
AMKBY’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth, Quality, and Momentum. In addition to the POWR Ratings grades we have just highlighted, one can see AMKBY’s Sentiment and Stability ratings here.
AMKBY is ranked #1 of 45 stocks in the A-rated Shipping industry.
STMicroelectronics N.V. (STM)
STM is a Geneva, Switzerland-based semiconductor company that manufactures and markets semiconductor integrated circuits and discrete devices worldwide. The company sells its products through distributors, retailers, and sales representatives serving telecommunications, consumer electronics, automotive, computer, and industrial sectors.
On May 18, 2022, STM and SP Group (SP), a government-affiliated electricity and gas distribution company in Singapore, signed an agreement to install a district cooling system at ST AMK TechnoPark to provide chilled-water-as-a-service to meet both the manufacturing and spatial cooling needs of STM. Its cooling capacity of up to 36,000 refrigerant tons (RT) will help STM achieve 20% savings in cooling-related electricity consumption annually and reduce carbon emissions of up to 120,000 tons per year for ST Technopark. This should help STM progress toward its decarbonization goals.
For its fiscal 2022 first quarter, ended April 2, 2022, STM’s net revenues increased 17.6% year-over-year to $3.55 billion. The company’s gross profit came in at $1.66 billion, up 40.9% from the prior-year period. Its operating income was $877 million for the quarter, representing a 99.3% increase from the prior-year period. While its net income increased 104.4% year-over-year to $746 million, its EPS grew 102.6% to $0.79. As of April 2, 2022, the company had $2.83 billion in cash and cash equivalents.
The $3.30 consensus EPS estimate for its fiscal 2022, ending Dec.31, 2022, represents a 52.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to be $15.19 billion for the same quarter, indicating a 19.1% rise from the prior-year period. STM’s EPS is expected to grow at a 5% rate per annum over the next five years.
Over the past three years, the company’s revenue, EBITDA, and total assets have grown at CAGRs of 11.8%, 21.9%, and 12.5%, respectively. STM’s 0.95x non-GAAP forward PEG is 29.8% lower than the 1.35x industry average. In terms of forward Price/Cash Flow, STM is currently trading at 8.56x, which is 48.3% lower than the 16.56x industry average. And over the past month, it has gained 4.9% in price to close yesterday’s session at $39.32, down 24.6% from its 52-week high of $52.15.
STM’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Quality, Growth, Sentiment, and Value. Click here to see the additional ratings for STM (Momentum and Stability).
The stock is ranked #4 in the Semiconductor & Wireless Chip industry.
Agilent Technologies, Inc. (A)
A provides core bio-analytical and electronic measurement solutions to the life diagnostics and applied chemical markets. The Santa Clara, Calif.-based company offers electronic and bio-analytical measurement, semiconductor, and board testing. It markets its products through direct sales, distributors, resellers, manufacturer’s representatives, and electronic commerce.
On May 10, 2022, A’s PD-L1 IHC 22C3 pharmDx, Code SK006 in vitro diagnostic (IVD) device received the European CE Marking in identifying cervical cancer patients for treatment with KEYTRUDA, an anti-PD-1 therapy developed by Merck & Co. (MRK), in combination with chemotherapy. Because cervical cancer is the fourth most common cancer among women, this expansion will help A’s IVD to gain substantial exposure to European markets in the coming months and help deliver better results.
For its fiscal year 2022 first quarter, ended Jan.31, 2022, A’s net revenue increased 8.1% year-over-year to $1.67 billion. The company’s non-GAAP income from operations came in at $441 million, representing an 11.4% rise from the prior-year period. A’s non-GAAP net income increased 12.2% year-over-year to $368 million. Its non-GAAP EPS came in at $1.21, representing a 14.2% year-over-year improvement. As of Jan. 31, 2022, the company had $1.11 billion in cash and cash equivalents.
Analysts expect A’s EPS to grow 20.1% year-over-year to $4.60 for its fiscal 2022, ending Oct. 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The $6.36 billion consensus revenue estimate for the same fiscal year indicates a 14.1% year-over-year improvement. The company’s EPS is expected to grow at a 14.2% rate per annum over the next five years.
Over the past three years, the company’s revenue, EBITDA, and total assets have grown at CAGRs of 8.9%, 13.1%, and 4.9%, respectively. A’s 1.73x non-GAAP forward PEG is 5.4% lower than the 1.83x industry average. And over the past month, the stock has gained 3.8% in price to close yesterday’s trading session at $125.98, down 29.8% from its 52-week high of $179.57.
A’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, Sentiment, and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for A’s Momentum here.
A is ranked #3 of 49 stocks in the Medical - Diagnostics/Research industry.
QCOM shares were trading at $128.01 per share on Tuesday afternoon, down $4.11 (-3.11%). Year-to-date, QCOM has declined -29.71%, versus a -17.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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