Among the Most Undervalued NASDAQ Stocks to Buy According to Hedge Funds
4 weeks ago
0 4 minutes read
We recently published a list of 13 Most Undervalued NASDAQ Stocks To Buy According To Hedge Funds. In this article, we are going to take a look at where PayPal Holdings, Inc. (NASDAQ:PYPL) stands against other most undervalued NASDAQ stocks to buy according to hedge funds.
The NASDAQ Index closed more than 10% below its December high of 20,174 on March 6, 2025. This officially puts the index in a market correction – which has happened a dozen times since 2010. Historically, the index has delivered an average return of 21% in the 12 months following its first close in correction territory, compared to an annual average of 15% over the entire period. This suggests that past corrections have often been followed by above average gains. Meanwhile, proposed tariffs under the Trump administration could significantly affect trade. As of February 27, 2025, these tariffs were set to raise the average tax on US imports to 13.8%, which is the highest level since 1939. Some duties are already in effect, shaking up the stock market.
Adding to market uncertainty is the current government’s inconsistent trade policy. Initially, tariffs were set to take effect on Chinese, Canadian, and Mexican imports on February 4. However, duties on Canadian and Mexican goods were postponed until March 4, then further adjusted on March 6, granting exemptions until April 2 for goods complying with the free trade agreement. These back-and-forth policy changes have contributed to market volatility. Despite the uncertainty, history shows that the NASDAQ has recovered from every past correction, suggesting this pullback could present a buying opportunity for investors.
Understandably, the market has seen considerable movement this year, influenced by earnings reports, concerns over DeepSeek, and uncertainty around President Trump’s tariff policies. With rising volatility, investors should focus on fundamentals, take a long-term approach, and carefully evaluate valuations. As of February 28, 2025, the US stock market was trading about 1% below fair value. Morningstar’s 2025 US Market Outlook suggests that the market was approaching the upper end of its fair value range, noting investors should set realistic expectations for returns. Morningstar advised favoring value stocks over growth stocks, as growth stocks were priced at their highest premium since the 2021 tech boom, while value stocks remained undervalued. In a market where economic policies can quickly shift valuations, portfolio positioning is crucial. Regardless of short-term tariff impacts, investors should focus on stocks trading well below their long-term value while being cautious with overvalued ones.
In a turbulent market where growth stocks are tumbling and value stocks have gained, sector valuations are starting to balance out. Healthcare, real estate, and basic materials, which were undervalued at the start of 2025, have moved closer to fair value. Meanwhile, consumer cyclical stocks, previously the most overvalued, have now dropped to fair value. Some sectors have moved differently, like communication services becoming more undervalued, while consumer defensive stocks have continued to rise and are now the most overvalued, trading at a 17% premium.
For this article, we used the Finviz screener to filter out stocks listed on the NASDAQ exchange with a forward P/E ratio of less than 15. Using Insider Monkey’s Q4 2024 hedge fund database, we examined the hedge fund sentiment for each stock and selected 13 most popular ones. The stocks are ranked in ascending order based on the number of hedge fund holders as of Q4 2024. We have also mentioned the forward P/E ratio as of March 12 for each company.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is PayPal Holdings, Inc. (PYPL) The Most Undervalued NASDAQ Stock To Buy According To Hedge Funds?
A consumer in a cafe paying for goods using a mobile payment app.
Number of Hedge Fund Holders: 94
Forward P/E Ratio as of March 12: 14.10
Placed second on our list of the most undervalued stocks is PayPal Holdings, Inc. (NASDAQ:PYPL). It provides a global digital payments platform for merchants and consumers. On February 24, the company announced that it is bringing its enterprise services under one umbrella with PayPal Open, combining brands like Braintree and Hyperwallet to streamline business payments. With PayPal Open, businesses get easier access to fraud protection, buy now, pay later options, global transactions in 140 currencies, lending solutions, and AI-powered insights, all through a single platform. However, Venmo will stay separate in the United States because of its strong brand recognition.
In 2024, PayPal Holdings, Inc. (NASDAQ:PYPL) saw solid financial and operational growth, driven by improvements in branded checkout, P2P services, and Venmo, along with a stronger pricing strategy. Revenue increased 7% to $32 billion, while total payment volume increased 10% to nearly $1.7 trillion. Non-GAAP earnings per share also grew 21% year-over-year. The company generated $6.8 billion in free cash flow and repurchased $6 billion in shares last year. For 2025, PayPal expects steady growth in transaction margin dollars as well as strong free cash flow.
As per Insider Monkey’s fourth quarter database, 94 hedge funds were bullish on PayPal Holdings, Inc. (NASDAQ:PYPL), up from 90 funds in the prior quarter.
Overall, PYPL ranks 2nd on our list of most undervalued NASDAQ stocks to buy according to hedge funds. While we acknowledge the potential of PYPL to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
