Got $1,000? 3 Stocks to Buy Now While They're on Sale

Despite the S&P 500's historically high valuation, the article highlights three potentially undervalued stocks: Alibaba, Altria, and Carnival. Alibaba, trading significantly below its peak at 11x next year's adjusted EBITDA, is navigating past regulatory and macro headwinds by expanding overseas and integrating AI, with analysts projecting 8-10% revenue/EBITDA CAGR. Altria, America's largest tobacco company, is offsetting declining smoking rates through price hikes, buybacks, and a strategic pivot to smoke-free products, offering a 6.5% dividend yield and trading at 12x forward earnings. Carnival, having successfully recovered from its pandemic-induced debt crisis with strong passenger growth and profitability, is expanding its fleet and destinations, with analysts forecasting a 24% EPS CAGR and a valuation of 12x next year's earnings.

Analysis

Despite the S&P 500's elevated 31x earnings valuation, opportunities for undervalued stocks persist beyond large-cap dominance. This analysis highlights Alibaba, Altria, and Carnival, each presenting a distinct investment thesis amid current market conditions.

Alibaba (BABA) trades over 40% below its October 2020 high and at 11x next year's adjusted EBITDA, suggesting undervaluation. The company has overcome regulatory and macro headwinds by expanding overseas e-commerce and integrating AI. Analysts project an 8% revenue CAGR and 10% adjusted EBITDA CAGR (FY25-FY28), indicating growth re-acceleration as regulatory pressures dissipate.

Altria (MO) shows resilience against declining U.S. smoking rates via price increases, cost controls, and share buybacks, supporting a 4% adjusted EPS CAGR (2024-2027). Its strategic pivot to smoke-free products, including the NJOY acquisition, targets $5 billion in revenue by 2028. At 12x forward earnings with a 6.5% forward dividend yield and 79% payout ratio, Altria offers an attractive income play.

Carnival (CCL) has achieved a robust post-pandemic recovery, becoming profitable in fiscal 2024 with over 100% occupancy and reduced net debt to $27.5 billion. Analysts forecast a 5% revenue CAGR and a significant 24% EPS CAGR (FY24-FY27), driven by fleet expansion, new destinations, and digitized onboard services. Trading at 12x next year's earnings and nearly 60% below its January 2018 high, Carnival offers substantial long-term growth potential.

Key Decisions for Investors

• Investors should monitor the easing of US-China trade tensions as a potential catalyst for Alibaba's re-rating, given its strong projected growth and current undervaluation.
• Consider Altria for income-focused portfolios, leveraging its consistent dividend growth and strategic shift towards higher-growth smoke-free products to offset traditional cigarette declines.
• Evaluate Carnival for long-term growth exposure, recognizing its successful post-pandemic recovery, significant EPS growth projections, and current valuation discount relative to its historical highs.