These stocks under $10 won’t break the bank.
The S&P 500 is heading into 2022 near all-time highs after more than doubling from its March 2020 lows. At this point, quality stocks trading for less than $10 per share are few and far between. Stocks priced at that level can be a red flag for investors that something is seriously wrong with a company. Many of these low-priced stocks have challenged business models or difficult near-term outlooks. However, the CFRA Research analyst team has identified eight cheap, high-quality stocks that could be excellent buying opportunities for frugal investors. Here are eight stocks under $10 to buy in December, according to CFRA.
New Oriental Education & Technology Group Inc. (ticker: EDU)
New Oriental Education & Technology is one of the largest education companies in China. The stock has taken a huge hit in 2021, dropping from 52-week highs of around $20 to less than $3 after the Chinese government announced a crackdown on for-profit after-school tutoring companies. The near-term regulatory outlook for New Oriental remains uncertain, but analyst Aaron Ho says the sell-off is a buying opportunity for long-term investors. Ho says New Oriental has the cash position and digital resources needed to adjust its services for both regulatory compliance and profitability. CFRA has a “buy” rating and a $5 price target for EDU stock, which closed at $2.20 on Dec. 13.
Kinross Gold Corp. (KGC)
Kinross Gold recently dropped more than 10% after the Canadian gold miner announced a $1.42 billion buyout of Great Bear Resources Ltd. Analyst Matthew Miller says Kinross has several growth projects and an attractive valuation. The stock currently trades at a steep discount to peers on most major valuation metrics, including price-earnings ratio and enterprise multiple. Miller projects that Kinross’ free cash flow will ramp up from $250 million in 2021 to around $1.2 billion in 2022, and says the stock will outperform as gold prices rise. CFRA has a “strong buy” rating and a $9.38 price target for KGC stock, which closed at $5.20 on Dec. 13.
Oatly Group AB (OTLY)
Oatly is the world’s largest oat milk producer. With the stock trading at less than $9 per share, analyst Arun Sundaram says Oatly’s valuation is “too attractive to ignore.” Sundaram projects 33% compound annual revenue growth for Oatly over the next decade, higher than the 26% 10-year annual growth rate he projects for plant-based meat company Beyond Meat Inc. (BYND). However, Oatly currently trades at a significantly discounted enterprise value-sales multiple compared to Beyond Meat. Finally, Sundaram says Oatly’s near-term production and capacity headwinds are only temporary. CFRA has a “buy” rating and a $15 price target for OTLY stock, which closed at $8.19 on Dec. 13.
Pitney Bowes Inc. (PBI)
Pitney Bowes specializes in mailroom automation systems and other facility management services. Analyst John Freeman says Pitney’s strong third-quarter earnings report, including revenue growth of 11% on a two-year basis, suggests the company has reached an inflection point as it pushes to help companies bridge the gap between software-based ecosystems and physical goods shipping services. CFRA projects 44.7% earnings per share growth in 2022. Freeman says Pitney Bowes has significant valuation upside, but the stock is best suited for investors with a higher risk tolerance. CFRA has a “strong buy” rating and a $14 price target for PBI stock, which closed at $6.41 on Dec. 13.
TAL Education Group (TAL)
TAL Education is another Chinese education stock that has gotten battered by the regulatory crackdown. The stock is down more than 90% in 2021, but Ho says TAL’s financial position should allow it to adapt to the evolving regulatory environment and remain profitable. Despite government restrictions on supply, Ho says he expects demand for after-school tutoring services to remain high. Ho expects strict government enforcement of the new restrictions, but says industry leaders will ultimately weather the storm. He predicts that TAL will resume revenue growth in fiscal 2023. CFRA has a “buy” rating and a $10 price target for TAL stock, which closed at $4.65 on Dec. 13.
Telefonica SA (TEF)
Telefonica is the leading telecom company in Spain. Analyst Adrian Ng says Telefonica has made several advantageous financial maneuvers, including paying down debt, buying E-Plus in Germany and GVT Holding in Brazil, and exiting the Central American market. In the third quarter, Telefonica acquired 700 megahertz of wireless spectrum in Spain and expanded its German 5G network to more than 100 cities. Ng says these changes should help unlock value as the company focuses its business on more stable markets. Telefonica also pays a generous 10.6% dividend. CFRA has a “buy” rating and a $5.50 price target for TEF stock, which closed at $4.15 on Dec. 13.
Telecom Italia SPA (TIIAY)
Telecom Italia is the leading fixed line and wireless telecommunications provider in Italy, and it also operates in Brazil. Ng says the company’s “Beyond Connectivity” initiative through 2023 aims to shift Telecom Italia’s focus from stabilizing operations to generating growth. The initiative revolves around generating equity free cash flow, reducing debt and distributing 20% to 25% of equity free cash flow to investors via dividend payments. Ng says U.S. private equity firm KKR & Co. Inc. (KKR) may also raise its recent $12 billion buyout bid for Telecom Italia. CFRA has a “buy” rating and a $5.70 price target for TIIA.Y stock, which closed at $5.04 on Dec. 13.
Tencent Music Entertainment Group (TME)
Tencent Music is a leading online music platform in China and is the parent company of QQ Music, Kugou Music and WeSing. Tencent Music shares are down more than 65% in 2021 as Chinese regulators tighten restrictions on tech stocks and U.S. regulators threaten to delist Chinese stocks that do not comply with new auditing requirements. Analyst Ahmad Halim says advertising revenue should help Tencent Music expand margins in the long term, and the stock’s sell-off has created an attractive buying opportunity for value investors. CFRA has a “buy” rating and a $9 price target for TME stock, which closed at $6.43 on Dec. 13.
Best cheap stocks to buy under $10:
— New Oriental Education & Technology Group Inc. (EDU)
— Kinross Gold Corp. (KGC)
— Oatly Group AB (OTLY)
— Pitney Bowes Inc. (PBI)
— TAL Education Group (TAL)
— Telefonica SA (TEF)
— Telecom Italia SPA (TIIAY)
— Tencent Music Entertainment Group (TME)
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