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A rough start to 2025 has pulled the US stock market down more than 8%, pushing dozens of stocks into undervalued territory. Along the way, some stocks have seen especially big changes in their valuations, moving from fairly valued territory to significantly undervalued.
In the wake of the stock market’s selloff, 125 of the 855 US-listed stocks Morningstar covers now sit at 5 stars, signaling that they’re significantly undervalued. Of those, 11 began the year fairly valued at 3 stars, while one, Manhattan Associates MANH, has dropped from an overvalued 2-star rating all the way to 5 stars.
Agilent Technologies AAkamai Technologies AKAMBio-Techne TECHEdison International EIXGlobant GLOBHewlett Packard HPEJames Hardie Industries JHXManhattan Associates MANHTaiwan Semiconductor Manufacturing TSMTarget TGTTeradyne TERTeva Pharmaceutical Industries TEVA
US Stocks Look Broadly Undervalued
The stock market started the year slightly overvalued, trading at a 3% premium to its fair value estimate based on the 639 stocks covered by Morningstar analysts out of the 1,265 in the Morningstar US Market Index. The stock market fell to as much as a 17% discount following US President Donald Trump’s tariff announcement in early April. Since then, the stock market has recovered some ground and is now trading at a 10% discount to its fair value.
Understanding Morningstar’s Stock Ratings
Several sectors have seen an even steeper dropoff in their price/fair value ratio. The consumer cyclical sector started the year 18% overvalued and is now 10% undervalued, while the technology sector started 4% overvalued and has dropped to 13% undervalued. Meanwhile, the communication services sector, which started the year 6% undervalued, has dropped further to a 23% discount; it’s now the most undervalued sector.
Looking at the US-listed stocks under Morningstar’s coverage, 56% are now undervalued, compared with 37% at the start of the year. Meanwhile, 14% are overvalued, compared with 23% at the start of the year.
Distribution of Star Ratings for US-Listed Stocks
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5-Star Ratings Driven by Falling Share Prices
A dramatic shift in a stock’s star rating is uncommon and typically reflects a major change in its price or fair value. Among the 12 5-star stocks highlighted in this article, several have seen modest adjustments to their fair values this year, but not large enough to significantly influence their ratings. Instead, steep share price declines have been the primary driver of the rating changes for these stocks. All 12 stocks have fallen at least 20% in the year to date, with five down more than 30%.
Here’s more of what Morningstar analysts have to say about these stocks.
Agilent Technologies
Fair Value Discount: 32%Economic Moat: Wide
Agilent stock has been steadily declining in 2025, down 33% since its year-to-date high on Jan. 22.
Following the company’s earnings call in February, Morningstar senior equity analyst Julie Utterback said: “With Agilent’s relatively weak quarter ended January including a 7% academic/government sales decline on a cautious US spending outlook versus Waters WAT’s quarter ended in December, investors may worry that demand and margins face more risk than previously assumed. Agilent’s long-term opportunities remain compelling, and our wide-moat rating continues to reflect the firm’s intangible assets and switching costs in its very sticky and relatively high-growth end markets, including biopharmaceutical manufacturing.”
Additionally, following the tariff announcements in early April, Utterback said that “the direct impact from tariffs on long-term profits will likely be limited in scope” and Agilent has “in China, for China” manufacturing status, which limits tariff risk.
Utterback has more about Agilent stock here.
Akamai Technologies
Fair Value Discount: 45%Economic Moat: Narrow
Akamai stock plummeted following the company’s earnings report in February, dropping 22% in a single day. Despite the move, Morningstar equity analyst Samuel Siampaus bumped up the company’s fair value estimate to $135 per share from $100 and upgraded its moat to narrow from none.
“Akamai’s fourth-quarter and full-year 2024 results revealed steady growth in the firm’s computing and security businesses, which now account for over two-thirds of firmwide revenue,” Siampaus said. “Shares of Akamai traded down in after-hours trading as investors digested the company’s 2025 guidance, which fell below expectations. Management noted some maturing in its key security offerings and cloud partnership that will offer near-term headwinds in 2025. However, we find assurance in Akamai’s long-term guidance of accelerating total revenue growth to 10%-plus by 2029. We think the firm can continue to drive sustainable revenue growth through increased security and computing service penetration among its delivery customers.”
Investors can find Siampaus’ full take on Akamai stock here.
Bio-Techne
Fair Value Discount: 41%Economic Moat: Narrow
Bio-Techne has fallen 35% since its year-to-date high on Jan. 22.
Following the firm’s earnings call in early February, Morningstar senior equity analyst Jay Lee said: “Narrow-moat Bio-Techne reported strong second-quarter earnings with revenue of $297 million, or 9% year-on-year growth. Management cited improvement in its biopharma end markets as well as earlier-than-expected timing of orders in its cell and gene therapy solutions. Protein sciences grew by 7% compared with the same period last year, while diagnostics and spatial biology grew by 12%. The company saw better demand and order activity from large pharma customers, including capital expenditure on instruments, bulk order reagent requests, and increased daily purchases. In China, the company has started to see some early effects of government stimulus reflected in its instruments demand, and management expects the region to return to positive growth soon despite a difficult macroeconomic environment.”
Take a deeper dive into Lee’s outlook for Bio-Techne.
Edison International
Fair Value Discount: 29%Economic Moat: Narrow
Edison stock tumbled 37% from Jan. 6 to Feb. 14 amid the wildfires in Edison’s service territory in Southern California. Since Feb. 14, the stock has made back some of its losses, gaining 15%.
“Before the Southern California wildfires began in early January, Edison International was well positioned to grow faster than most utilities as California pursued ambitious clean energy targets,” said Morningstar strategist Travis Miller. “Now Edison faces legal, regulatory, and operational challenges related to the fires. This could slow growth or impair shareholder value. California’s quest to eliminate carbon emissions from its economy by 2045 will require a huge buildout of the state’s electric grid infrastructure. This includes investments to support grid safety, renewable energy, electric vehicles, distributed generation, and energy storage. We forecast Edison will invest nearly $8 billion annually for at least the next five years, resulting in 7% annual earnings growth off 2024 earnings, excluding one-time fire-related impacts.”
Read Miller’s full take on Edison stock here.
Globant
Fair Value Discount: 40%Economic Moat: Narrow
Globant stock fell 28% on Feb. 21 after the firm gave lower-than-expected revenue guidance for 2025 and the first quarter. Since then, the decline has continued, and shares are down over 50% since the stock’s year-to-date high on Feb. 13.
Following the earnings call in February, Morningstar senior equity analyst Rob Hales said: “Globant called out two new risks for the first quarter that likely spooked the market: political and macroeconomic volatility in Latin America (Mexico and Brazil) and lower revenue from top client Disney DIS. We cut our fair value estimate to $180 per share from $201 for narrow-moat Globant and think the market reaction was overdone. We think recovering to a 14% growth rate in the next few years is reasonable, given macroeconomic headwinds that should subside, Globant’s peer outperformance in an industry with double-digit market growth expectations, and new artificial intelligence-driven project opportunities.”
Read Hales’ full take on Globant here.
Hewlett Packard
Fair Value Discount: 37%Economic Moat: None
Hewlett Packard stock has steadily declined since late January, down nearly 40% since Jan. 22.
After the company reported earnings in early March, Morningstar director of equity research Eric Compton said: “No-moat-rated Hewlett Packard Enterprise reported fiscal first-quarter results that largely met our expectations, with adjusted EPS of $0.49 versus our expectation of $0.50. However, the updated full-year outlook was a bit of a shocker, as HPE announced a new cost-cutting program, impacts from tariffs, and unexpected margin pressure. As we sort through these, our impression is that these are temporary issues. After updating our forecasts, we expect a rough second and third quarter, but a recovery in the fourth quarter, putting HPE back on track with our original expectations.”
Compton continued: “We are modestly decreasing our fair value estimate to $24 per share from $25, and view the after-hours reaction, with shares trading down 20% to under $15, as an overreaction. HPE was one of those names with at least some artificial intelligence-related expectations baked into its story, and that group in general has sold off in difficult market conditions, which is what we see happening here. We’ll admit, our forecasts are now much more back-end loaded, with improvements expected throughout the year, particularly in the fourth quarter, and if these do not materialize, we will have to reevaluate how temporary some of these issues may indeed be.”
Investors can find more of Compton’s take on Hewlett Packard here.
James Hardie
Fair Value Discount: 38%Economic Moat: Wide
Shares of James Hardie stock tumbled 15% following the company’s announcement that it would acquire Azek, a producer of outdoor building products. Since the stock’s year-to-date high on March 17, the stock has plummeted 33%.
“We believe the market got this one wrong,” said Morningstar equity analyst Esther Holloway following the announcement. “We estimate the market is only ascribing about half the merger benefits and applies a lower 12 times enterprise value/EBITDA multiple on the combined group, implied by the preannouncement closing price. Using a 14 times EV/EBITDA multiple—the same as James Hardie’s multiple prior to the deal being announced and similar to Azek’s at its last undisturbed trading price—we think the bid price is fair assuming all USD 300 million of cost savings and revenue gains are achieved from fiscal 2030.”
Holloway continued: “Before the announcement, we thought James Hardie’s shares were undervalued by 15% but they dropped a further 15% on the news. Our long-term view is unchanged. We expect James Hardie to maintain above-market growth driven by market share gains, category expansion, channel and distribution partnerships, brand investments, and innovation-driven products.”
Take a deeper dive into Holloway’s outlook for James Hardie.
Manhattan Associates
Fair Value Discount: 29%Economic Moat: Wide
Shares of Manhattan Associates stock sold off sharply following fourth-quarter earnings, tumbling 25% on Jan. 29.
Following the earnings report, Morningstar senior equity analyst Dan Romanoff said: “We are lowering our fair value estimate to $230 per share from $240 for wide-moat Manhattan Associates after the firm reported good fourth-quarter results but guided 2025 down based largely on weakening demand for implementation services and worsening currency headwinds. We thought the stock had been overvalued and believe our expectations were shy of consensus over the medium term. While the stock is down markedly after hours, adjustments to our model were less severe and mainly relate to 2025 as we thought expectations were running ahead of reality in recent months. We do not think results indicate any change in the competitive environment and we continue to view Manhattan as the leader in supply chain software.”
Investors can find more of Romanoff’s take on Manhattan stock here.
Taiwan Semiconductor Manufacturing
Fair Value Discount: 42%Economic Moat: Wide
TSMC stock has fallen 30% since its year-to-date high on Jan. 23.
The largest single-day pullback, 13%, came after Chinese artificial intelligence firm DeepSeek launched its R1 model in late January. Following the pullback, Morningstar equity analyst Phelix Lee said: “DeepSeek’s model exacerbated concerns as to whether adding more computation power is the best way to improve models, and whether AI spending by the likes of Amazon and Microsoft is durable. We anticipate elevated short-term volatility to TSMC’s share price as cloud service and app developers leverage R1’s open-source nature to improve their own offerings. These efficiency gains may temporarily depress the demand for computation power. However, we believe TSMC will benefit from more durable AI spending in the long run, as more potent models improve the likelihood of profitable innovations, which incentivizes reinvestment. Another growth driver is cheaper models, which reduce barriers to entry and attract numerous smaller app developers.”
Read Lee’s full take on TSMC here.
Target
Fair Value Discount: 32%Economic Moat: None
Target stock has steadily declined in 2025, down 35% since its year to date high on Jan. 27.
Following the firm’s earnings call in early March, Morningstar equity analyst Noah Rohr said: “Shares declined by a low-single-digit percentage on March 4, which, we think, is a result of management’s tepid sales outlook. Indeed, management noted that demand for discretionary items deteriorated in February (the first month of fiscal 2025) amid waning consumer confidence. Management also cited tariffs as an added layer of uncertainty that may affect consumers’ appetite. With about 50% of Target’s sales derived from discretionary categories such as apparel, electronics, and home furnishings, we acknowledge that the retailer is susceptible to cyclical swings in consumer demand. Target posted double-digit comparable sales growth in 2020 and 2021 when demand for discretionary goods was robust. While fiscal 2025 looks poised to be a tumultuous year, we still think Target is capable of posting low-single-digit comparable sales growth longer term, which is roughly consistent with our expectations for growth across the retail industry broadly.”
Rohr has more about Target stock here.
Teradyne
Fair Value Discount: 43%Economic Moat: Wide
Teradyne fell 17% on March 11, following the company’s investor day. Since its year-to-date high on Jan. 6, the stock is down 47%.
“Wide-moat Teradyne held its investor day, overshadowed by escalating concerns over trade restrictions, particularly in the semiconductor industry, a core market for the firm’s automated test equipment segment,” said Compton. “We attribute the 17% decline in stock price to a combination of factors including lowered SemiTest growth expectations for 2025 and heightened market concerns over tariffs. We’ve recently observed the same in other semiconductor stocks as well. Teradyne shared that while some projects would experience delays and capital expenditure reviews, it has not seen order cancelations yet. Management noted that the current expected impact is for a slowdown in the second quarter (now expecting flat to negative 10% sequential growth), which is pressuring 2025 growth to mid-single digits (down from midteens). While management guided for the “low end” of their previous 2026 guidance range, we believe current trends also increase the likelihood of a potential guidance reductions for 2026. After incorporating the near-term headwinds, we lower our fair value estimate to $129 from $135 and continue to view the shares as undervalued.”
Investors can find more of Compton’s take on Teradyne here.
Teva Pharmaceutical Industries
Shares of Teva stock plummeted following the company’s fourth-quarter earnings report, dropping 14% on Jan. 29. In the year to date, the stock is down 38%.
Following the earnings call, Morningstar equity analyst Keonhee Kim said: “No-moat Teva reported better-than-expected fourth-quarter earnings and ended the year on solid footing. Total sales were down 5.1% but were up 6.9% excluding last year’s Sanofi contributions thanks to a broad-based growth across regions. Margins held roughly steady sequentially despite a ramp-up in spending in both research and marketing thanks to improving product mix and greater efficiency. Full-year 2024 also marked the second consecutive year of growth for Teva and, in our opinion, fully solidifies that the firm is delivering steady improvement and executing its pivot to its growth strategy.”
Kim continued: “Having said that, management provided next year’s guidance—3.4% and 0.6% growth at midpoint for revenue and earnings, respectively—that came in softer than our assumptions. The market reacted aggressively to this disappointing news, and shares are down over 12% at the time of writing. After trimming our near-term assumptions, we lowered our fair value estimate to $23 per share from $24. Despite our valuation revision, we still see Teva as the best-positioned generics player in our coverage. Our favorable long-term outlook on Teva remains supported by the firm’s deep pipeline, commercial expertise, and attractive commercial assets, and is not swayed by today’s volatility.”
Take a deeper dive into Kim’s outlook for Teva.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.