Stocks to buy

The 3 Most Undervalued Blue-Chip Stocks to Buy in February 2024

Undervalued blue-chip stocks have been reliable equities for many years. These companies are likely to gain market share and offer good revenue and net income growth.

Investors often gravitate toward undervalued blue-chip stocks when they don’t want to take as many risks. While some blue-chip stocks leave money on the table relative to growth stocks, other blue-chip stocks still have plenty of growth left.

Some undervalued stocks combine decent valuation metrics with double-digit revenue and earnings growth rates. These are some of the most undervalued blue-chip stocks to consider. 

Amazon (AMZN)

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Amazon (NASDAQ:AMZN) delivered earnings that got many investors excited. The company reported 14% year-over-year (YOY) revenue growth and exceeded $10 billion in net income to close out 2023.

Two of the corporate giant’s top segments were third-party seller services and advertising services. These segments achieved 20% and 27% YOY revenue growth, respectively. 

Amazon’s artificial intelligence offers have been picking up momentum. The company’s CEO, Andy Jassy, mentioned rising demand and hinted AI could have a more pronounced role in future earnings reports.

“AWS’s continued long-term focus on customers and feature delivery, coupled with new genAI capabilities like Bedrock, Q and Trainium have resonated with customers and are starting to be reflected in our overall results,” Jassy stated in the press release.

Jassy also mentioned the advertising business and expressed optimism about the company’s new business ventures. Amazon stock has more than doubled over the past five years and more gains seem likely for long-term investors.

Alphabet (GOOG,GOOGL)

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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has delivered a 47.23% gain over the past year and has a 5-year gain of 168.84%. The company has been doing a good job of diversifying money away from its advertising segment while continuing to grow in the industry.

Ad revenue increased by 11.0% YOY in Q4 2023 while Cloud revenue outpaced it with a 25.7% YOY growth rate. Google Cloud recently became profitable and is operating with better margins. This development will help Alphabet command a lower P/E ratio in the coming months. 

Growth rates have been accelerated as a dismal 2022 is far off in the rearview mirror. The company’s Q4 revenue growth rate exceeded its revenue growth rate for the full year of 2023.

The company’s “Other Bets” segment has tremendous top-line growth but operates at a net loss that has narrowed YOY. Google Cloud generated enough profits to offset the net losses from the “Other Bets” segment.

Broadcom (AVGO)

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Broadcom (NASDAQ:AVGO) is one of the few stocks that offer high appreciation, dividend growth and a decent valuation. Most stocks only give you one of those three traits, and a few of them offer two of them.

Shares have almost doubled over the past year and have gained 370% over the past five years. Growth stems from the company’s semiconductor chips and enterprise software products. Its AI chips and the recent acquisition of VMware are catalysts for these high-growth verticals.

Even with the substantial gains over the past five years, Broadcom still has a 1.63% dividend yield. Broadcom closed out fiscal 2023 with a 14% dividend increase compared to the previous quarter. 

The company has regularly increased the dividend by at least 10% per year for several years. Broadcom has raised its dividend for 13 consecutive years ever since its first dividend distribution in fiscal 2011. The quarterly dividend per share was $1.02 back in 2017. Now, it’s $5.25 per share every quarter.

Broadcom trades at a forward P/E ratio of 26 which is solid for a company with its growth potential. With other chipmakers reporting strong earnings, investors should feel excited about Broadcom’s next earnings report.

On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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