The S&P 500 may no longer be in correction territory, but there are still some great stocks that you can buy on sale. And some of them are very cheap.
The three stocks I'm about to discuss aren't exactly cheap for no reason. There are some legitimate concerns regarding the future growth and profitability of all three of them. But if each company's management can achieve its targets, they could be great choices for patient long-term investors.
With that in mind, here are two dirt cheap stocks you might want to take a closer look at right now. I already own both and plan to keep building my positions for as long as these attractive prices are available.
A great company with temporary uncertainty
When President Trump recently announced 25% tariffs on cars that aren't made in America, General Motors (GM 0.77%) was one of the hardest-hit auto stocks, and for good reason: About 30% of the vehicles GM sells in the United States are built in either Canada or Mexico, and another 18% are built in other foreign countries.
NYSE: GM
Key Data Points
This could certainly weigh on GM's business in the short term, but from a long-term perspective, GM is an extremely cheap stock with a lot to like. The company recently guided for net income of $11.50 per share at the midpoint of its guidance, and while this doesn't include the impact of tariffs, even if the tariffs lower the company's profit by say, 20%, the stock would still trade at a mid-single-digit P/E multiple. Plus, management clearly agrees that the stock is attractive, having authorized a new $6 billion share repurchase plan, which represents roughly 13% of GM's entire market cap.
Looking forward, there are some exciting potential catalysts for the automaker. It arguably has the most impressive traction in electric vehicles in the U.S., other than Tesla. And it's worth noting that GM's electric vehicles are largely made in the United States. Plus, shutting down the Cruise robotaxi development will save the company $1 billion per year and allow it to focus on mastering automation technology for its personal vehicles instead.
The bottom line is that there are some near-term headwinds, and they could certainly lower the company's margins for the time being. But at a rock-bottom valuation of just four times forward earnings (yes, a P/E of just four), it looks extremely attractive for investors who measure their returns in decades.
A lot to look forward to
PayPal (PYPL 1.03%) fell quite a bit after releasing its fourth-quarter results, with concerns about margins and sluggish growth weighing on the stock. But there's a lot to like about PayPal right now.
First, the relatively new management team initially prioritized efficiency, and we've seen that pay off. Revenue increased by 7% in 2024, but thanks to impressive margin expansion, adjusted EPS grew by 21% and the company produced $6.8 billion of free cash flow. PayPal has $15.4 billion in cash on its balance sheet, and it has been buying back stock hand over fist, recently adding $15 billion to its buyback authorization and using essentially all of its free cash flow on repurchases.
Most exciting is that the growth initiatives management has implemented are not apparent in the numbers just yet. For example, the highly anticipated advertising platform, which is run by Uber's (UBER -1.25%) former head of advertising, didn't even launch until midway through the fourth quarter.
In its recent investor day presentation, PayPal's leaders showed investors their roadmap to unlocking growth and value. In the near term, the company aims to significantly boost Venmo monetization, continue building its omnichannel capabilities, and provide end-to-end solutions for small businesses. Management sees an opportunity to achieve adjusted EPS growth in the "low teens" by 2027 and a sustainable EPS growth rate of more than 20% over the long term. With PayPal now trading for just 13 times forward earnings, now could be an excellent time to take a closer look.
As a final thought, I have absolutely no idea what these stocks will do over the coming weeks or months. If auto tariffs persist for a while, it's entirely possible GM will remain volatile, and weak consumer spending could weigh on PayPal, just to name two examples of things that could potentially go wrong here.
