A stock market correction is defined as a pullback of 10% to 20% from a market peak. The S&P 500 (^GSPC 0.08%), which tracks approximately 500 of the most significant and profitable publicly traded companies in the U.S., entered correction territory on March 13. This marks the first occurrence of such a correction since 2022.
During periods of market volatility like corrections, the stocks of high-quality companies often become more affordable, providing investors with attractive opportunities to purchase shares at reduced prices, even if the market does not remain within the correction range. I believe this includes companies such as PepsiCo (PEP -1.16%), Ulta Beauty (ULTA 2.86%), and PayPal (PYPL 0.79%) at this moment.
1. PepsiCo
Pepsi is one of the most recognizable brands in the world, boasting an extensive beverage portfolio that now includes the prebiotic soda brand Poppi, acquired for nearly $2 billion. The company also owns famous snack brands like Frito-Lay. Given its massive scale and diverse offerings, Pepsi demonstrates significant stability and resilience, leading to rare opportunities for discounts on Pepsi stock.
Currently, Pepsi stock is approximately 25% lower than its highs for 2023. Historically, it has traded at an average of 26 times earnings over the last decade, but it is now priced at just 21 times earnings, representing a 19% discount to its usual valuation.
2. Ulta Beauty
Ulta Beauty, while not as iconic as Pepsi, is still a prominent player with over 1,400 locations offering cosmetic products and salon services. Investors should recognize that this sector is generally resistant to recession, as shown by Ulta’s same-store sales growth during the Great Recession (2008-2010).
Although the company anticipates modest same-store sales growth in 2025, the stock has declined by nearly 40%. This downturn is due not only to the slow growth but also to a decrease in operating margins, which fell from 15% in fiscal 2023 to an expected 11.8% in fiscal 2025. Nonetheless, the company is still projected to earn $1.3 billion in operating income next year, making its current $16 billion valuation quite appealing.
3. PayPal
PayPal’s stock reached an all-time high in 2021 but saw significant volatility afterwards, with a performance bounce of nearly 40% in 2024 followed by a nearly 20% drop at the start of 2025. This decline appears linked to the overall downtrend in financial technology (fintech) stocks, as evidenced by comparisons with the Global X FinTech ETF.
Despite this, PayPal has shown positive momentum with improving transaction margins under new management, leading to a brighter outlook for earnings growth through 2027. Currently, PayPal stock is trading at just 17 times earnings, which is among its lowest valuations ever. If the company delivers on its forecasted earnings growth, it could present a substantial upside for investors buying in now. Overall, Pepsi, Ulta Beauty, and PayPal are resilient companies that have weathered the recent market downturn, making them attractive options for investors looking to commit their funds.
