Investors have endured a fair amount of pain as the S&P 500 has flirted with bear market territory in recent weeks. Although the market has shown some signs of recovery from its June lows, numerous stocks are still selling well below their 12-month highs.
However, thanks to that drop, a lot of companies are trading at bargain levels. Among consumer-related stocks, three could be particularly attractive right now: Booking Holdings (BKNG 1.62%), Qualcomm (QCOM 2.01%), and Target (TGT -2.14%). Let's take a closer look.
Booking Holdings
The company formerly known as Priceline.com encompasses several travel-related websites, including Priceline, KAYAK, Agoda, and its current namesake, Booking.com. The bear market has taken its price to below $2,000 per share, down almost 30% from its high.
Despite this lower stock price, the company's financials continue to improve. Its revenue for the first two quarters of 2022 came in at just under $7 billion, which exceeds the $6.7 billion it reported in the first half of 2019 -- pre-pandemic.
Admittedly, its $157 million in net income for the first half of 2022 is a small fraction of the $1.7 billion earned in the same period of 2019. Operating expenses rose 19% over the three-year time frame, and $735 million in losses on its holdings of several equity securities dramatically reduced earnings.
While Booking didn't offer specific revenue guidance, it said on its Q2 2022 earnings call it expects to report "record" revenue in Q3. Still, assuming it can meet analyst estimates, it will have a forward price-to-earnings ratio (P/E) of 20 -- a level that could make it a bargain if travel growth moves ahead of 2019 levels.
Qualcomm
Most analysts classify Qualcomm as more of a tech stock, due to its technical lead in smartphone chipsets. Nonetheless, it continues to derive most of its revenue from handsets, a factor that makes it heavily dependent on the consumer.
Indeed, consumer trends appeared to influence the company's own estimates. For the upcoming fiscal fourth quarter of 2022, Qualcomm forecast revenue of $11 billion to $11.8 billion, indicating revenue growth of 23% year over year. That would mean a slowdown from fiscal Q3, where handset revenue increased 59% year over year.
But the fact that 23% growth indicates a "slowdown" speaks to this market's resilience. Grand View Research forecasts a compound annual growth rate (CAGR) of 69% in the 5G chipset market. Such an outlook indicates that the anticipated slowdown will likely not persist as the 5G upgrade cycle continues.
The anticipated growth may explain the relative strength of the stock, which has held steady over the past 12 months even as the S&P 500's total return has dropped by 6%. Yet, a P/E of 13 indicates that the market probably doesn't fully appreciate this potential. Investors should consider buying Qualcomm at these levels.
Target
Like many of its peers, Target has fallen significantly as it's dealt with a slowdown in consumer spending. Moreover, amid the supply chain constraints, Target ordered more inventory than it needed, so in the near term, it will have to sell some of its items at either lower margins or outright losses. Target stock fell to its lowest point since mid-2020 upon this news.
However, the retail stock has since rebounded, rising by just over 20% in the past six weeks. Despite the recent increase, Target's P/E stands at about 14 times earnings. By comparison, peers Walmart and Costco sell for 27 times and 42 times earnings, respectively.
Target also exhibited long-term confidence in its stock through the dividend. Following the inventory announcement, Target increased its payout by 20%, taking its streak of annual dividend hikes to 51 years. The yearly payout, now at $4.32 per share, yields 2.6%. This is well above the S&P 500 average of 1.5%.
None of this means that Target's challenges with inventory levels have ended. However, the stock's P/E multiple of 14 indicates investors overreacted to the negativity. Given that excessive sell-off, investors may want to consider buying now to collect the dividend and wait as Target's earnings multiple moves to a level more comparable with Walmart's.
