While the original social-media-inspired speculative ideas may be stumbling around the ring, intrepid investors with some loose pocket change may be able to acquire undervalued meme stocks. And no, I’m not talking about securities that are only cheap on paper. These enterprises may legitimately offer rational grounds for gambling.
Keep in mind that these meme stocks to buy remain speculative. Just because a large number of random folks on the Internet like these ideas doesn’t necessarily equate to upside. You’re still going to have to do your research. Still, one possible benefit of banking on the resurgence of the memes is that you may have margin of error. In normal circumstances, a terrible business is a terrible business. But when you’re talking about meme stocks, other retail buyers may “forgive” your blunders. Again, I must warn you – this arena is speculative. Still, if you want to try your luck, these are the undervalued meme stocks to target.
Foot Locker (FL)
Foot Locker (FL) storefront sign in a city
Source: shutterstock.com/philip openshaw
One of the riskiest names among undervalued meme stocks to buy, Foot Locker (NYSE:FL) continues to attract attention despite less-than-encouraging news. A few weeks ago, CNBC reported that the company’s sales dropped almost 10% during its fiscal second quarter. Tellingly, management stated that the decline stemmed from ongoing “consumer softness.” I’ll say.
Still, meme trackers identify FL as one of the meme stocks for speculators to consider. And on a financial basis, you could make the argument that it’s undervalued. In particular, Foot Locker posted a three-year revenue growth rate (per-share basis) of 7.7%, beating out 63.67% of its peers. Even with this solid stat, FL trades at only a sales multiple of 0.22x, well below the median of 0.69x.
Also, FL’s options market dynamic suggests that while traders recognize FL’s severe volatility risk, they’re also not closing the door on potential upside. Surprisingly, options flow data (basically big block trades) shows a contested environment between bulls and bears. Notably, FL’s highest price target stands at $30, implying more than 69% upside potential.
Rio Tinto (RIO)
Production of copper wire, bronze cable in reels at factory.
Source: Parilov / Shutterstock.com
A metals and mining specialist, Rio Tinto (NYSE:RIO) ranks among the most popular undervalued meme stocks due to its relevance. Sure, the commodities business generally doesn’t perform well during rising interest rate cycles. Subsequently, RIO fell nearly 11% since the beginning of this year. However, the company produces metals critical to our future, including copper and lithium.
With the rise of electric vehicle integration, RIO is one of the meme stocks that make sense over the long run. It’s also legitimately undervalued. Right now, shares trade at 8.73x forward earnings. In contrast, the sector median stat comes in at 10.21x.
Operationally, Rio Tinto stands out for its three-year EBITDA growth rate of 19%. It’s consistently profitable, featuring robust gross, operating, and net margins. Also, while RIO traders may be mitigating tail risk, rising implied volatility at higher strike prices indicates possible brewing enthusiasm.
Lastly, analysts peg RIO as a consensus strong buy. Their average price target lands at $72.75, implying 15% upside potential.
Tenet Healthcare (THC)
Nurse holding a tablet with icons representing different aspects of healthcare and healthcare data representing CANO stock.
Source: metamorworks / Shutterstock
A for-profit multinational healthcare services firm, Tenet Healthcare (NYSE:THC) operates 65 hospitals and over 450 healthcare facilities. To be quite blunt, Tenet doesn’t sound like your typical idea for meme stocks to buy. Nevertheless, meme trackers note that it’s one of the more popular ideas. Since the start of the year, THC gained nearly 50% of its equity value. That’s hard to argue with.
Still, is Tenet one of the undervalued meme stocks? While the broader financial view presents challenges – particularly in the balance sheet – THC trades at only 11.26x forward earnings. In contrast, the sector median stat lands at 22.3X. Shares also trade at 8.05X free cash flow, below the sector median of 19.98x.
Interestingly, THC’s options market dynamic shows a greater magnitude of implied volatility at higher strike prices compared to the lower range. It’s possible, though not guaranteed that traders may be hedging downside risk while opening the door for robust upside potential.
On a final note, analysts peg THC as a consensus strong buy. Their average price target clocks in at $94.73, implying 29% growth.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
