Since the start of the year, the market has given many stocks that were hit hard a second chance. However, many of these stocks are overpriced, with questionable prospects. There are much better second chance stocks candidates out there.

Plenty of higher-quality names remain overlooked. Selling at far more reasonable prices, they all have the potential to make a strong recovery in the future. Sometimes, this is due to short-term factors negatively affecting sentiment.

Once said factors clear up, sentiment will improve, propelling the stock to higher prices. In other cases, certain catalysts/factors are enabling the underlying company to deliver strong operating results, but investors are only slowly catching on.

That’s the story here, with these seven second chance stocks. Unloved and out of favor for now, consider inspecting each of them now, either as potential buys, or as possible names to add to your watchlist.

Walt Disney (DIS)

As I have argued recently, Walt Disney (NYSE:DIS) isn’t exactly the most magical stock on Earth right now. Yes, shares moved moderately higher last month.

The market reacted positively to news that the media conglomerate agreed to a push from activist investor Nelson Peltz to reduce costs, and planned to reinstate its dividend.

However, this renewed bullishness didn’t last long. DIS stock has since coughed back these gains. Given it seemed premature to bring back the dividend, and questionable whether cost-cutting alone will help improve results, I recommended investors sit things out for now.

Still, while I still give DIS a D rating in Portfolio Grader, it may still be worthwhile to keep it on your watchlist. I still give shares a B rating for earnings, and if purchased at the right prices, the stock could deliver strong returns if a true turnaround takes shape.

DISH Network (DISH)

DISH Network (NASDAQ:DISH) is best known as a provider of satellite television service, but they have focused on becoming a major provider of wireless internet recent years.

However, while this growth catalyst made the market excited about DISH stock during 2021, since then, sentiment has shifted in a big way, as the company has experienced subscriber losses for both its TV and wireless internet services. As a result, shares have fallen sharply during this timeframe, from the low-$40s to the low-teens per share.

Pessimism about DISH continues, as seen in a recent “double downgrade” from BofA analyst David Barden.

I currently give the stock a D rating in Portfolio Grader. Earning an A for earnings, and trading at a single-digit forward price-to-earnings (or P/E) ratio, it may now be one of the second chance stocks, at its current super-low valuation.

Movella Holdings (MVLA)

Movella Holdings (NASDAQ:MVLA) is a motion capture technology company that last than a month ago went public via a special purpose acquisition company (or SPAC) merger with Pathfinder Acquisition.

But not too long after debuting in the public markets, MVLA stock experienced a staggering price drop. Trading for around $10 per share ahead of the deal closing on Feb. 10, MVLA now changes hands for around $2.16 per share, a more than 77% decline. I currently give MVLA a D rating overall, but an A grade for earnings.

As stated in its SPAC merger presentation, they expect the company to report breakeven EBITDA in 2023, and become profitable on an EBITDA basis in 2024.

With trends like the metaverse help re-accelerate growth, after making a poor first impression, Movella may have a shot at improving its reputation in the future. This makes MLVA worth keeping an eye on.

Norfolk Southern (NSC)

As you likely know, railroad Norfolk Southern (NYSE:NSC) is in the regulatory crosshairs, considering the widely reported East Palestine, Ohio train derailment in February, as well as other derailments/safety incidents, including a more recent one.

Moving lower because of the uncertainty and controversy, NSC stock right now earns a D rating in Portfolio Grader, albeit with a B grade for earnings.

It may take some time before the company fully resolves the liabilities and regulatory scrutiny resulting from the aforementioned major derailment.

That said, with the market pricing in these risks, shares may soon enter second chance stocks territory. NSC right now trades for around 15.5 times earnings.

While in-line with the valuations of other Class 1 railroads, this sector has been under pressure since the East Palestine incident. This could ease in the future, providing a lift for all railroad stocks, NSC included.

PayPal Holdings (PYPL)

Throughout 2022, I was quite critical of PayPal Holdings’ (NASDAQ:PYPL) merits as a strong investment opportunity. Thus far, in 2023, I have largely held the same view.

While giving PYPL stock a B for earnings, overall shares continue to earn a D rating in Portfolio Grader. Growth challenges remain, considering the current economic slowdown, as well as competition from both old school and new school financial institutions.

Yet if additional weakness results in PYPL re-hitting its 52-week low ($66.39 per share), at that point the stock might be back in the buy zone. Although multiple expansion is limited due to decelerating growth, if current cost-cutting efforts boost profitability in 2023 and 2024, it may be enough to drive a partial recovery.

Toronto-Dominion Bank (TD)

Toronto-Dominion Bank (NYSE:TD) is another stock that earns a low D rating overall in Portfolio Grader, yet receives high marks (an A) regarding earnings. This may put shares in the Canada-based financial institution firmly in the second chance stocks category.

Although TD stock has slid lower since reporting earnings earlier this month, Scotiabank analyst Meny Grauman believes this sell-off has been overdone.

The latest numbers suggest that, despite rising interest rates, TD’s net interest margin (or NIM) is slowing down. This explains why the sell-side has trimmed its 2023 earnings forecasts. Interest rate trends remain favorable.

A full year earnings beat for TD may remain in reach. In addition, if the overhang from its still-pending merger with First Horizon (NYSE:FHN) resolves, whether from the deal completing, or even from the deal getting scrapped, this too could give shares a boost.

Verizon Communications (VZ)

Verizon Communications (NYSE:VZ) shares are down more than 30% over the past twelve months. The investors who bought the stock last year likely regret their decision.

Despite a low valuation (7.5 times earnings), VZ has continued becoming cheaper. This has made it the quintessential “value trap.”

With this in mind, it’s no mystery why I currently give VZ stock a D rating in Portfolio Grader. Admittedly though, it may not take much to change my view. I already give the telecommunications giant a high A grade for earnings. After walking back guidance for 2023, Verizon is in a strong position to exceed earnings expectations.

That’s not all. More progress with the rollout of 5G is something else that could improve sentiment for VZ stock throughout the year. With plenty in play to improve sentiment for heavily discounted VZ stock, this is another name to add to the watchlist.

On the date of publication, Louis Navellier had a long position in DIS. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.