In a market often driven by high valuations amid the seemingly unstoppable artificial intelligence (AI) hype, value stocks offer a refreshing alternative for investors seeking solid returns without the premium price tag. Value stocks appeal to investors who appreciate fundamentals like strong earnings, robust cash flows, and strategic market positioning.
From this basket of stocks, three names that have captured the attention of analysts at leading investment bank JPMorgan for their exceptional value potential are KLA Corporation (KLAC), L3Harris Technologies, Inc. (LHX), and Best Buy Co., Inc. (BBY).
These companies, spanning industries from cutting-edge semiconductor equipment to defense technology and retail innovation, have secured their spots on the investment firm's curated list of attractive value plays. According to JPMorgan analysts, their combination of appealing valuations and promising growth prospects makes them standout opportunities for investors as 2024 winds down.
Stock #1: KLA Corporation
California-based KLA Corporation (KLAC) specializes in advanced process control and enabling solutions for manufacturing wafers, reticles, integrated circuits, packaging, and printed circuit boards.
Valued at about $89.1 billion by market cap, shares of KLA Corporation have posted gains of around 20.7% over the past 52 weeks and 14% on a YTD basis.
From a valuation standpoint, KLAC stock is trading at 20.45 times forward earnings, which is a discount to the sector median of 25.80x. Apart from its attractive valuation, the stock also has a respectable 15-year track record of consecutive dividend hikes, underscoring the company's steadfast commitment to rewarding its shareholders. On Dec. 3, KLA Corp paid its shareholders a quarterly dividend of $1.70 per share. Its annualized dividend of $6.80 offers a modest 1.02% yield.
In late October, the company unveiled its fiscal 2025 Q1 earnings report, which exceeded Wall Street’s expectations on both the top and bottom lines. Total revenue for the quarter climbed 18.6% year over year to $2.8 billion, while adjusted EPS of $7.33 rose 27.7% annually.
During the quarter, the company demonstrated exceptional financial strength, generating $995.2 million in cash flow from operating activities and $934.8 million in free cash flow. These figures highlight KLAC’s solid cash-generating capabilities. Additionally, capital returns reached an impressive $765.5 million for the quarter, reflecting the company’s commitment to delivering substantial value to its shareholders while maintaining strong operational performance.
CEO Rick Wallace emphasized the optimism surrounding continued semiconductor market growth in Q4 2024 and into 2025, despite some near-term challenges faced by customers. The CEO highlighted that “KLA's industry-leading portfolio combined with disciplined operational execution positions the company well to support customer investments, particularly in leading-edge AI and high-performance computing applications."
Looking forward to fiscal Q2, management is forecasting total revenues to land at $2.95 billion, plus or minus $150 million, with non-GAAP gross margin anticipated to come in at approximately 61.5%. Adjusted EPS for the upcoming quarter is projected to arrive between $7.15 and $8.35.
Overall, Wall Street appears optimistic about KLAC stock, with a consensus “Moderate Buy” rating. Of the 26 analysts offering recommendations, 14 advise a “Strong Buy,” one gives a “Moderate Buy,” and the remaining 11 suggest a “Hold.”
The average analyst price target of $823.38 indicates a potential 24% upside from the current price levels.
Stock #2: L3Harris Technologies
Florida-based L3Harris Technologies, Inc. (LHX) delivers mission-critical solutions to government and commercial clients worldwide. From advanced intelligence, surveillance, and reconnaissance (ISR) systems and combat technologies to cutting-edge space payloads and tactical communication systems, the company supports the air, land, sea, and space sectors. With expertise in propulsion technologies, electronic warfare, and public safety communications, L3Harris is a global leader in defense, security, and innovation.
Valued at a market cap of around $46.1 billion, shares of L3Harris have climbed 23.2% over the past year and 13.8% on a YTD basis.
In terms of valuation, LHX is trading at 18.96 times forward earnings, well below the sector median of 21.47x. The company has a stellar track record of 23 years of consecutive dividend increases, underscoring its strong commitment to rewarding shareholders. On Oct. 16, the company declared a quarterly dividend of $1.16 per share, set to be distributed to its shareholders on Dec. 6. With an annualized dividend of $4.64 per share, LHX offers a 1.91% yield, enhancing the stock’s appeal as a steady income-generating investment.
Following the company’s Q3 earnings report, which exceeded both top and bottom-line expectations, shares of L3Harris gained more than 3% on Oct. 25. Q3 revenue rose 8% year over year to $5.3 billion and came in slightly above Wall Street’s forecast, fueled by the acquisition of Aerojet Rocketdyne (AR).
Additionally, this growth was largely driven by sustained high demand for the company’s resilient communication products and night vision devices within the Communication Systems (CS) segment, highlighting its continued market strength. On an adjusted basis, the company’s earnings of $3.34 per share rose 5% year over year, driven by higher adjusted segment operating income.
Commenting on the Q3 performance, CEO Christopher E. Kubasik said, “We delivered strong third-quarter results, highlighted by outstanding book-to-bill of 1.4x, solid organic growth, and while continuing to improve margins as we make progress toward the financial framework announced at our 2023 Investor Day.”
The CEO also pointed out that the company is making remarkable progress on its LHX NeXt initiative, surpassing its 2024 cost savings target of $400 million, which has now been raised to at least $600 million.
With a pipeline full of additional opportunities, management appears confident that the company will reach its $1 billion savings goal a year ahead of schedule, supporting its ambition to achieve 2026 segment operating margins of at least 16%. For fiscal 2024, management projects revenue to range between $21.1 billion and $21.3 billion, while adjusted EPS is anticipated to land between $12.95 and $13.15.
Analysts tracking L3Harris Technologies expect the company’s bottom line to increase almost 6% year over year to $13.09 per share in fiscal 2024 and grow another 9.8% to $14.37 per share in fiscal 2025.
Wall Street is optimistic about LHX stock, with a consensus “Moderate Buy” rating overall. Of the 20 analysts offering recommendations, 13 advise a “Strong Buy,” one suggests a “Moderate Buy,” five advise a “Hold,” and one suggests a “Strong Sell.”
The average analyst price target of $277.45 indicates about 15.7% potential upside from current price levels.
Stock #3: Best Buy
Minnesota-based Best Buy Co., Inc. (BBY) is among the world’s largest specialty consumer electronics retailers. With over 1,000 North American stores and a dedicated workforce of 85,000, Best Buy provides expert advice, the latest name-brand tech products, and comprehensive services, including consultations, delivery, installation, and repair.
With a market cap of approximately $19.5 billion, shares of this consumer electronics retailer have delivered 21.2% returns over the past year, and are up 13.7% on a YTD basis.
Priced at 14.25 times forward earnings and 0.44 times sales, BBY stock is priced at a discount to its sector peers right now. Backed by an impressive 13-year track record of consecutive dividend boosts and a healthy 56.97% payout ratio, Best Buy has also proven its unwavering commitment to shareholders. On Nov. 27, the company declared a quarterly dividend of $0.94 per share. Its annualized dividend of $3.76 per share offers a highly enticing 4.23% yield.
Dividends aren’t the only way the company rewards its investors. In fiscal 2025 Q3, Best Buy returned a total of $339 million to shareholders, of which $137 million was directed toward share repurchases. Looking ahead, the company remains focused on enhancing shareholder value, with plans to spend approximately $500 million on share repurchases throughout fiscal 2025.
The company released weaker-than-expected fiscal 2025 Q3 earnings on Nov. 26, with both revenue and earnings down slightly from the year-ago quarter to $9.5 billion and $1.26 per share, respectively. Domestic revenue for the quarter reached $8.7 billion, reflecting a 3.3% year-over-year decline, largely due to a 2.8% drop in comparable sales.
The biggest declines came from appliances, home theater, and gaming, although strong growth in computing, tablets, and services helped cushion the impact. On the international front, revenue totaled $748 million, down 1.6% from the previous year, driven primarily by a 3.7% drop in comparable sales.
CEO Corie Barry pointed to several factors contributing to these softer-than-anticipated sales figures in Q3, including ongoing macroeconomic uncertainty, customers holding off for deals and sales events, and distractions surrounding the election, particularly in non-essential categories.
For fiscal 2025, management anticipates revenue to range between $41.1 billion and $41.5 billion, while adjusted EPS is forecasted to arrive between $6.10 and $6.25. Additionally, capital expenditures for the entire year are expected to remain steady at approximately $750 million.
Analysts tracking Best Buy forecast the company’s earnings to drop slightly year over year to $6.18 per share in fiscal 2025 before rising almost 8% to $6.67 per share in fiscal 2026.
Overall, BBY stock has a consensus “Moderate Buy” rating on Wall Street. Of the 23 analysts offering recommendations, 11 advise a “Strong Buy,” 11 maintain a “Hold,” and one suggests a “Moderate Sell.”
The average analyst price target of $99.10 indicates an 11.4% potential upside from the current price levels.
