The 3 Most Undervalued Nasdaq 100 Stocks to Buy: Summer 2024

Stocks to buy

After last year’s monstrous 53% gains the Nasdaq 100 is at it again in 2024. Year-to-date (YTD) the popular index is up another 13%. That might not sound like a big deal but it comes after a big drop in April when its tech-heavy components suffered significant share price depreciations.

The index is rallying once again and sits at new record highs. So, some investors may think undervalued Nasdaq stocks aren’t available. But let’s explore three quality companies the market is offering at a nice discount for you to still buy in May.

Diamondback Energy (FANG)

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Oil and gas driller Diamondback Energy (NASDAQ:FANG) is the largest Permian Basin pureplay, though it ranks behind Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and Occidental Petroleum (NYSE:OXY) in overall size and revenue from the region.

One common trait Diamondback Energy has with its larger peers is to consolidate the field through acquisitions. In February, the driller announced it would acquire rival Endeavor Energy Partners in a $26 billion cash-and-stock deal. It follows Exxon buying Pioneer Natural Resources and Occidental acquiring CrownRock. Yet, Diamondback Energy’s transaction will elevate it to the third largest player been Exxon and Chevron.

The oil stock was a solid play in its own right and will only be enhance by the transaction. Also, it generates substantial free cash flow (FCF), most of which it returns to shareholders as dividends. FCF has grown at an astounding 100% compounded annual growth rate (CAGR) over the last five years while its dividend has increased an an equally impressive 68% CAGR. The Endeavor deal will fortify that shareholder value while bolstering its own bottom line.

However, FANG stock is cheap at 9 times earnings estimates and a bargain-basement 11x FCF, making it a top undervalued Nasdaq stock to buy today.

Kraft Heinz (KHC)

Source: Eyesonmilan/Shutterstock.com

Consumer packaged goods giant Kraft Heinz (NASDAQ:KHC) is another deeply discounted Nasdaq stock.

It trades for 10 times estimates and 12x FCF, as well as just a fraction of its book value. Best known for its Kraft brand of cheese and Heinz ketchup, the consumer goods stock owns a portfolio of established, well-known brands including Jell-O, Kool-Aid, Philadelphia cream cheese and Maxwell House coffee.

Kraft Heinz is reportedly considering its own strategic actions by selling its equally beloved Oscar Mayer hotdog and packaged meats brand for $5 billion. It may be looking for healthier options as Chief Executive Officer (CEO) Carlos Abrams-Rivera told analysts it is seeking out gluten-free opportunities in which to expand.

Inflation, though, has been taking its toll on Kraft Heinz, as sales fell 1.2% in the first quarter. Consumers are looking for value as the unrelenting rise in prices causes them to go down market for cheaper products. The packaged goods company’s stock briefly reached a new 52-week high prior to earnings only see see shares fall afterward. KHC stock is down 9% in 2024 but represents a good deal for a company shifting to meet changing consumer needs.

Also, it pays a generous dividend yielding 4.8% annually, it’s why Warren Buffett says he will never sell Kraft Heinz stock.

PayPal (PYPL)

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Financial services leader PayPal (NASDAQ:PYPL) continues trading at multi-year lows even though strong tailwinds are behind it. It is the dominant payments platform with a 45% share of online payment processing market globally, or more than its next 12 largest rivals combined.

Yet, PayPal stock trades at 14 times earnings estimates, two times sales and 14 times FCF. So why the discount? Because it has headwinds too, and this is a classic case of the market overreacting.

The number of rivals it has shows just how competitive the online payments space is becoming. PayPal has seen a steady erosion in the number of users of its platforms (it also owns Venmo and Braintree). In its most recent quarter, the number of active accounts fell 1% to 427 million from 433 million a year ago. Notably, a 1 million account increase from last quarter indicates PayPal’s efforts to grow its relevance with consumers is starting to pay off.

And, investors are beginning to respond. PayPal stock is up 8% YTD and 13% higher than where it was six months ago. With shares still trading more than 13% below their 52-week high, there is plenty of time in May to buy this stock and ride it as it tracks back up to its 2021 all-time highs.

On the date of publication, Rich Duprey held a LONG position in XOM and CVX stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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