Global Stocks Severely Undervalued in a Market of Optimism

In a world where optimism often drives markets to overvaluation, three global stocks stand out as compelling contrarian opportunities. ON Semiconductor, Palo Alto Networks, and BBB Foods are trading at significant discounts to their intrinsic values, offering patient investors a chance to capitalize on undervalued innovation, resilience, and growth. Let's dissect their fundamentals, strategic moves, and long-term potential.

1. ON Semiconductor: Powering the Future at a 15.8% Discount

ON Semiconductor (ON) is a cornerstone of the semiconductor industry, specializing in power solutions, intelligent sensing, and analog technologies. Despite a 14.19% revenue decline in 2024, the company trades at $50.01 per share, a 15.8% discount to its intrinsic value of $59.38. This undervaluation stems from macroeconomic headwinds, not operational weakness.

Financial Fundamentals:
- Free Cash Flow Surge: ON generated $1.21 billion in free cash flow in 2024, a 201.67% increase from 2023, despite a challenging market.
- Margin Resilience: Non-GAAP operating margins held steady at 17.3% in Q2 2025, outperforming peers.
- EPS Growth: Analysts project a 9.86% CAGR in EPS from 2024 to 2028, with a forward P/E ratio dropping to 7.78x by 2028.

Strategic Moves:
- EV and Industrial Focus: ON is doubling down on high-growth sectors like electric vehicles (EVs) and industrial automation, where its power solutions are critical.
- R&D Investment: A 6.11% increase in R&D spending in 2024 underscores its commitment to innovation.
- Share Buybacks: $654 million repurchased in 2024, signaling management's confidence in the stock's intrinsic value.

Investment Thesis: ON's undervaluation is temporary, driven by cyclical downturns rather than structural issues. With EV adoption and industrial electrification accelerating, ON is poised to outperform as demand rebounds.

2. Palo Alto Networks: Cybersecurity's Consolidator at 18.8% Below Fair Value

Palo Alto Networks (PANW) dominates the cybersecurity sector with a $134.31 billion market cap and a 34% YoY growth in Next-Generation Security ARR to $5.1 billion. Despite its dominance, the stock trades at $203.99, a 18.8% discount to its estimated fair value of $251.07.

Financial Fundamentals:
- Revenue Growth: Q3 2025 revenue hit $2.3 billion, up 15% YoY, with full-year guidance of $9.17–9.19 billion (14% growth).
- Profitability: Non-GAAP net income of $0.80 per share in Q3 2025, with a 76.6% gross margin.
- Cash Flow Efficiency: Adjusted free cash flow exceeded $590 million in Q3, with margins of 37.5–38.0% expected for FY2025.

Strategic Moves:
- Platformization: Consolidating its offerings into a unified cybersecurity platform, enhancing cross-selling and customer retention.
- AI Integration: Launching the Cortex Cloud platform, which leverages AI to detect and mitigate threats in real time.
- Market Positioning: Targeting cloud and AI security, two of the fastest-growing segments in cybersecurity.

Investment Thesis: PANW's platformization and AI-driven innovation position it as a consolidator in cybersecurity. With global cyber threats escalating and cloud adoption surging, its 12.5% annual revenue growth forecast outpaces the market, making it a long-term winner.

3. BBB Foods: Mexico's Grocery Discounter at a 26% Discount

BBB Foods (TBBB), Mexico's leading hard-discount grocery chain, is trading at $26.60, a 26% discount to its intrinsic value. The company's “Bueno, Bonito y Barato” (Good, Nice, and Affordable) model has driven 38.3% YoY revenue growth in Q2 2025, with 3,031 stores and 142 new openings in the quarter.

Financial Fundamentals:
- Revenue Expansion: TTM revenue of $3.6 billion, with same-store sales up 17.7% in Q2 2025.
- Margin Challenges: A negative net profit margin (-0.21%) due to aggressive reinvestment in logistics and store expansion.
- Earnings Growth: Projected 52.73% CAGR in earnings over the next five years, despite a current P/E of -409.3x.

Strategic Moves:
- Aggressive Expansion: Plans to enter four new regions in 2025, leveraging proximity to existing markets to minimize branding risks.
- Private Label Growth: Private label penetration increased significantly from 2023–2024, boosting margins and customer loyalty.
- Logistics Optimization: Investing in infrastructure to reduce costs and improve efficiency as it scales.

Investment Thesis: BBB Foods' reinvestment strategy and market leadership in Mexico's $100 billion grocery sector justify its discount. While short-term margins are pressured, its long-term growth in same-store sales and regional expansion could drive a re-rating.

Conclusion: The Power of Patience in a Market of Optimism

ON Semiconductor, Palo Alto Networks, and BBB Foods represent a rare trifecta: strong fundamentals, strategic clarity, and deep discounts to intrinsic value.

• ON Semiconductor is a cyclical play with a clear path to outperformance as EV and industrial demand rebound.
• Palo Alto Networks is a secular growth story, leveraging AI and cloud to dominate a $300 billion cybersecurity market.
• BBB Foods is a high-conviction bet on Mexico's retail transformation, where reinvestment and scale could unlock massive value.

For patient, value-focused investors, these stocks offer asymmetric risk-reward profiles. While volatility is inevitable, the long-term upside—driven by innovation, market positioning, and disciplined execution—makes them compelling additions to a diversified portfolio.

Final Advice: Buy on dips, hold for the long term, and let compounding do the rest. The market's current optimism may overlook these gems, but history rewards those who see beyond the noise.