While the stock market has rallied nicely so far in 2023, some individual companies continue to fly under the radar -- perhaps outshone by investors' excitement over artificial intelligence or other hot trends. Of course, sometimes a stock is cheap because it deserves to be. But at other times, the market may simply have an unwarranted negative sentiment about a fundamentally good company.
Here are three stocks that could be falling victim to the latter.
1. Pinterest
Pinterest (PINS 4.04%) is a social media company that essentially serves as a one-stop shop for inspiration. Although Pinterest is up about 4% year to date, investors haven't been all that sold on the company recently, with its stock dropping over 23% in one week after reporting its first-quarter 2023 earnings.
On one hand, I can see why investors may want to steer clear of a company that isn't consistently profitable during these economic times. On the other hand, Pinterest's $603 million in revenue was up 5% year over year, which is impressive given the slowdown in digital advertising. In the past three quarters, Pinterest's year-over-year revenue growth has outpaced that of Meta Platforms, Alphabet's Google, and Snap.
Financials aside, key metrics for Pinterest revolve around user engagement. Its 463 million monthly active users (MAUs) are up 7% year over year, but more importantly, user engagement with shoppable pins is up.
Pinterest says over 50% of its users view it as a place to shop, which could be key to its ad revenue growth as it continues to play middleman between users and companies. Pinterest is in a unique position relative to its competitors, and I believe it'll pay off for investors with some patience.
2. AT&T
After weathering a large part of the storm that affected many sectors in 2022, telecom has had a lackluster year so far. And unfortunately, AT&T (T 1.02%) has experienced the worst of it out of the Big Three telecom companies.
Data by YCharts
Part of AT&T's poor 2023 performance can be attributed to the 10% drop it experienced on April 20 after releasing its Q1 2023 earnings -- its largest single-day decline in over two decades. It also doesn't help that Amazon is rumored to be partnering with Dish Network to offer 5G cellular plans to Prime members.
There seems to be no shortage of reasons to be bearish on AT&T, but I believe investor sentiment toward the company is undeservingly negative. Subscriber growth has slowed, but it's still adding customers at an impressive rate considering the environment. In Q1 2023, AT&T had 424,000 postpaid phone net adds, and 272,000 AT&T Fiber net adds.
The recent drops in AT&T's stock price have it well into the value territory. Add in its roughly 7% dividend yield, and the ceiling for AT&T seems to be much higher than its perceived floor. The company's debt will weigh on its balance sheet in the near future (especially with high interest rates), but the company is taking active steps to address it.
AT&T seems like a bargain at current prices.
3. Tapestry
Tapestry (TPR 1.68%) is a multinational fashion holding company with brands such as Coach, Kate Spade, Stuart Weitzman, and Juicy Couture. Tapestry's stock is up over 9% year to date thanks to a rally after it reported earnings for its fiscal 2023 third quarter (ended April 1).
Revenue in its latest quarter came in at $1.51 billion (up 5% year over year), which outperformed expectations and caused management to raise its fiscal 2023 guidance. Much of this success can be credited to its Asia markets, with China, Japan, and Other Asia segments growing by over 20%.
North America's growth -- or lack thereof -- was much less impressive, though it was to be expected. With economic uncertainty, recession fears, and inflation, it's no surprise that people were holding on to their cash instead of spending on handbags, clothes, and other accessories.
Tapestry said it planned to repurchase around $700 million in common stock in the current fiscal year, and it's so far spent $500 million. Management's aggressive stock repurchase plan could be a good signal to investors that the company believes it's a bit undervalued right now.
Tapestry's issues in North America should only be short-term and not anything long-term investors should be concerned about today. The company's growing global reach should be a driving force going forward.
