Everyone loves a sale, right? There’s nothing better than the feeling of saving money while also getting a product or service you value.
So let’s have a look at three stocks that are currently in the bargain bin — or something like it: Amazon (AMZN -1.50%), PayPal (PYPL -3.93%), and Tesla (TSLA 0.86%).
Image source: Getty Images.
1. Amazon
Amazon is near the top of my list when I think of stocks on sale. Since its 20-for-1 stock split in June of last year, shares are down more than 6%. That performance, however, seems at odds with the company’s improving fundamentals.
For one thing, CEO Andy Jassy appears to be finding his sea legs. Under his direction, Amazon has cut 27,000 jobs — a much-needed move, given the hiring spree the company embarked on during the COVID pandemic.In addition, Amazon is slowing the pace and scale of its capital expenditures after years of ramping up costly improvements to its sprawling fulfillment network.
At any rate, those investments are now starting to pay off. Operating income in its most recent quarter (the three months ending on March 30) was $4.8 billion. That’s the highest quarterly total since September 2021.
Best of all, Amazon shares remain attractively priced. The stock trades at a price-to-sales ratio of only 2.3 — well-below its 10-year average of 3.1.
2. PayPal
There’s no sugarcoating it: PayPal stock has been a terrible investment over the last 18 months. In fact, shares are down 68% over that period. Nevertheless, this presents an opportunity for investors willing to play the long game.
PayPal isn’t some newly minted fintech. The company goes back 25 years, even though it didn’t go public until 2015. It operates a global platform that facilitates digital and mobile payments. And while its platform isn’t without competition, it remains lucrative.
PayPal earned $795 million in net income in its most recent quarter (the three months ending March 31). It also generated almost $5.8 billion in free cash flow over the last 12 months.
As far as valuation, the company looks like a bargain. Shares trade at a price-to-sales ratio of 2.5, only a fraction of its 10-year average of 7.2. While not without risks, PayPal looks like a name that long-term investors should think hard about buying at these levels.
3. Tesla
Wait, is Tesla’s stock really on sale? Well, yes, it is.
It might come as a shock, but Tesla shares remain more than 50% off their split-adjusted all-time high of $410.
What’s more, the stock’s valuation — a longtime reason cited by Tesla bears — continues to decline. In fact, its price-to-earnings ratio of 56 is near an all-time low. Meanwhile, its price-to-sales ratio — which dates back much further in time — is 7.7, below its 10-year average of 9.4.
Of course, what really matters is the company behind the stock valuation. And on that front, there are more compelling reasons for investors to get excited.
In an attempt to broaden its appeal — and reach its goal of selling 20 million vehicles annually — Tesla is going to try advertising. And while advertising (and the evergreen promise that full self-driving is coming soon) has investors excited, the real key is that Elon Musk once again looks fully engaged with leading Tesla. The mercurial leader has found a new CEO for Twitter, meaning at least some of the responsibilities for that job will be coming off Musk’s plate.
While it’s unlikely Tesla will ever be a bargain stock when compared to the broader market, it remains a bargain when compared to the sky-high valuation it sported not long ago. And with so many innovations possible for the vehicles it produces (e.g., full self-driving and robotaxis), it’s likely the company will — at some point — regain its all-time high. To me, that makes the stock a bargain at its current price.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Amazon.com and Tesla. The Motley Fool has positions in and recommends Amazon.com, PayPal, and Tesla. The Motley Fool recommends the following options: short June 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.