At first glance, it may not look like a great time to find "cheap stocks." The S&P 500 is close to all-time highs, and some of the more prominent consumer stocks are the reason for its performance.
Nonetheless, the rally has left some of these stocks behind amid temporary challenges. That means investors are not too late to benefit from the current rally. Even with a budget of $500, these three value stocks can offer budget-minded investors long-term potential for growth at a reasonable price.
1. Celsius
Energy drink company Celsius Holdings (NASDAQ: CELH) has thrived in recent years. Its zero-sugar approach and scientific research on energy drinks won it a following among health enthusiasts, and a distribution deal with PepsiCo made its beverages easily available to the mass market.
Unfortunately, a sales slowdown prompted a major distributor, likely PepsiCo, to dramatically scale back orders in mid-2024. That reversed its red-hot revenue growth, at least temporarily. Since that time, the stock has fallen back by nearly 80%, and the slowdown in U.S. sales does not appear to have ended.
The lower stock price has taken its P/E ratio down to about 30, its lowest level since 2020. Moreover, even if U.S. sales do not pick up, it has a tremendous international opportunity. Outside of the U.S., sales increased by 37% in the third quarter of 2024. Also, international sales are just 7% of Celsius' revenue, meaning the company has barely tapped the massive markets in Europe and Asia.
Admittedly, as the distributor rightsizes its purchases from Celsius, the massive sales gains in recent years may or may not resume in the U.S. Nonetheless, with the fast-growing international markets becoming a larger share of overall sales, Celsius stock could prosper again as its global market expands.
2. Sea Limited
Tech and consumer conglomerate Sea Limited (NYSE: SE) may not be familiar to U.S. investors. However, the company operates market-leading e-commerce and fintech businesses in southeast Asia, and its gaming business claims one of the world's most popular mobile games, Free Fire.
Moreover, Sea Limited was a high-flying stock during the pandemic, and its fintech arm, SeaMoney, has steadily grown even in more difficult times. Still, missteps with e-commerce outside southeast Asia and the ban of Free Fire in India led to a massive sell-off in 2022 and 2023.
Fortunately, its e-commerce company, Shopee, scaled back outside southeast Asia. Now, it has followed in Amazon's footsteps by investing heavily in logistics in its home markets, expanding its competitive advantage.
Also, its gaming segment, Garena, will likely benefit from Free Fire returning to India soon. Additionally, its Need for Speed mobile game has gained increased traction in Asia, which will help reverse declines in this segment.
Amid those improvements, profit expectations have taken the company's forward P/E to around 34, just below the much larger Amazon at 37 times forward earnings. With all three businesses on track for increased prosperity, Sea Limited stock may have just begun to grow.
3. Target
Retail giant Target (NYSE: TGT) has struggled in recent years. The retailer has faced a sluggish economy and rising inflation. Internally, it had challenges rightsizing its inventory. Also, with the failure to succeed with its only international expansion in Canada a few years ago, Target's presence in all 50 states leaves it with few obvious avenues for expansion.
Still, despite its slow growth, the company and its stock have some bright spots. Companies including Ulta Beauty, Starbucks, and Apple operate shops within Target, which serve as a draw to bring people into its stores.
Also, the company has stepped up its omni-channel shopping experience and can often deliver goods on the same day. Thanks to its Target Circle 360 loyalty program, deliveries are free for orders more than $35.
Additionally, shareholders benefit from a payout of $4.48 per share annually, a dividend yield of 3.4%. That's far above the S&P 500 average of 1.2%. Given its 53-year history of raising its payout, it is likely the Dividend King will remain an excellent choice for income investors.
Also, the stock's woes have taken its P/E ratio to about 14, a level far below Amazon, Walmart, or Costco Wholesale. Assuming Target can overcome what are probably temporary challenges, the potential for multiple expansion alone could drive significant returns.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in Celsius and Sea Limited. The Motley Fool has positions in and recommends Amazon, Apple, Celsius, Costco Wholesale, Sea Limited, Starbucks, Target, Ulta Beauty, and Walmart. The Motley Fool has a disclosure policy.
