These sub-$5 stocks could deliver big gains in 2022.
In the past, companies used to split their share prices frequently to keep their stocks affordable to the general public. This has changed in recent years, however. Now, companies such as Amazon.com Inc. (ticker: AMZN) and Alphabet Inc. (GOOG, GOOGL) let their stock prices go up to the thousands, making it difficult for newer investors to buy any shares at all. As such, many traders gravitate to companies with much lower stock prices so they can buy large quantities of stock. But penny stocks tend to be risky and many operate low-quality businesses, so it’s necessary to use greater due diligence on the average low-priced stock. That said, there are some worthwhile prospects among inexpensive companies. Here are nine cheap stocks to buy for less than $5 per share, each of which has solid prospects.
Sundial Growers Inc. (SNDL)
Sundial Growers is a Canadian marijuana firm. The company originally started out trying to dominate the cannabis market there, but its efforts failed amid a brutally competitive playing field plagued by drastic amounts of excess inventory. SNDL stock nearly went to zero, but it became a Reddit and social media favorite and surged in early 2021. This allowed the company to issue tons of stock, paying off all its debt and ending up with more than a billion dollars of excess cash. The company is now reinvesting those funds into new businesses, such as retail cannabis and liquor stores, and a financial arm to lend money to other marijuana firms. Sundial’s new strategy seems reasonable and has a decent shot at success. The market, however, is still unimpressed, leaving shares at just 55 cents today. That could change as Sundial’s new investments start to pay off.
Western Copper and Gold Corp. (WRN)
Next among the best cheap stocks to buy under $5 is Western Copper and Gold, a Canadian mining firm focused on its Casino project in the Yukon province. The company counts Rio Tinto PLC (RIO) among its strategic backers. It also offers shareholders a strong balance sheet, as the company is debt-free. The company is progressing toward developing the mine and expects to give investors an updated feasibility study later this year. The project consists of 41% copper and 38% gold, along with smaller amounts of molybdenum and silver. As far as gold is concerned, Casino hosts more than 14 million ounces of measured and indicated reserve. Western’s shares surged from $1.20 to $2.80 last year as copper prices hit multiyear highs. There’s been a dip in copper and gold lately, hitting Western’s share price. With inflation on the prowl, however, demand may come roaring back for this sort of asset.
New Gold Inc. (NGD)
Unlike Western Copper and Gold, New Gold is already a gold-producing mid-tier mining operation. The company has mines in Canada and Mexico. New Gold is slated to be highly profitable; shares trade for around seven times 2022’s projected earnings. On an enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA) basis, shares go for less than a five multiple. This is an attractively priced stock. The stumbling block is the price of gold, which has leveled off around $1,800 per ounce over the past year. That’s down from the $2,100 peak the element reached in 2020. With the Federal Reserve planning to raise interest rates aggressively, it puts a damper on the outlook for precious metals. However, if anything forces the Fed to back down, or if inflation continues running ahead of expectations, gold mining shares such as New Gold could surge once again.
Uphealth Inc. (UPH)
Uphealth is a digital health care services company. The company went public via a special-purpose acquisition company, or SPAC, and totally botched the process. Uphealth quickly missed expectations and then raised capital at a sharply discounted share price, leading to absolute carnage for the stock. Down more than 75% from the original SPAC offering price, however, Uphealth may be primed for a comeback. For one thing, shares are now selling for less than four times revenues. That’s not bad for a company that guided to 50% revenue growth for next year. The company is already profitable on an EBITDA basis. The market may continue to punish Uphealth for being a SPAC that disappointed shareholders right out of the gate. If and when that changes, however, the stock could rally sharply.
ContextLogic Inc. (WISH)
ContextLogic is an e-commerce company that operates the Wish shopping app. Wish appeared to be taking the market by storm in 2020, as it enjoyed a massive pandemic-related boost. Wish’s model involves a so-called treasure hunt, where users buy unexpected or unusual products at unbelievably cheap price points. In 2021, however, the company ran into issues. Many shoppers complained of low-quality merchandise that quickly broke. Meanwhile, the company’s customer acquisition model broke down. As the economy reopened, advertisers such as Meta Platforms Inc. (FB) raised prices, making it unprofitable for Wish to continue marketing on digital platforms as it did before. Wish’s CEO has stepped aside and the stock is down more than 80%. It could keep dropping, but if a new CEO can get the company back on track, Wish would have a shot at a serious recovery.
Ambev SA (ABEV)
Ambev, a leading Brazilian brewing company, is an outlier among the top cheap stocks, boasting a $43 billion valuation. The company operates as a regional arm of global beer giant Anheuser Busch Inbev SA (BUD). Unlike many penny stocks, Ambev has no financial difficulties or major structural problems. In fact, it has a debt-free balance sheet, trades at a low price-earnings multiple and offers investors a healthy dividend. Shares have declined, however, due to factors outside of the company’s control. These include an unsettled political situation and soaring inflation in Brazil, along with a steep drop in on-premise beer consumption thanks to the pandemic. Both of these issues should clear up in 2022. Brazil has elections this year, which will provide certainty to the political situation. Meanwhile, restaurants and bars are reopening and the World Cup later this year is a huge drinking event in South America.
Moneylion Inc. (ML)
Moneylion is another busted SPAC opportunity. The company is a fintech operation primarily in Southeast Asia. Moneylion already has a sizable business. It reported 2.7 million customers in the third quarter of 2021, which was up half a million customers from the second quarter of the year. Over time, Moneylion is planning a “land and expand” approach where it continues to grow its active user base while cross-selling more individual products to each existing customer. New areas of growth will include cryptocurrency and buy-now-pay-later services. Moneylion isn’t yet profitable, and in current market conditions, investors aren’t giving unprofitable SPACs any benefit of the doubt. At less than two times its projected 2023 revenues, however, Moneylion shares are certainly cheap enough as long as management continues to execute on the business plan.
Paysafe Ltd. (PSFE)
Paysafe is a leading payments company focused on online applications such as e-cash, digital wallets and online gaming. The company went public via a SPAC merger and has suffered the same sort of treatment as most other fintech companies over the past six months. At $4, however, the stock looks compelling. For one thing, insiders including both company management and the backers of the SPAC bought more stock in the open market. For another, shares are trading slightly below the enterprise value at which the company had previously been acquired back in 2017. Additionally, Paysafe’s 2029 bonds continue to trade at 94 cents on the dollar, indicating a high degree of confidence in the company’s long-term financial prospects, even with the stock price having dropped sharply. As the SPAC overhang lifts, Paysafe should rally in 2022.
Up Fintech Holding Ltd. (TIGR)
Up Fintech is a major retail brokerage operation for the Chinese marketplace. The stock went public in 2019 but didn’t do much for quite awhile. In 2020, however, Up Fintech enjoyed a massive surge in activity and share price performance. Like in the U.S., overseas brokerage firms enjoyed a boom in activity as people were stuck at home and turned to the markets as a new hobby and way of making money. TIGR stock soared from $6 to the $30s at one point. Since then, the stock has crashed. Chinese regulators have cracked down on numerous domestic companies, and U.S. investors are shunning virtually all Chinese stocks. Up Fintech continues to grow revenue by more than 40% per year and is selling for just 13 times estimated 2022 earnings. The company also counts Interactive Brokers Group Inc. (IBKR) among its strategic investors, giving it significant credibility outside of China.
9 best cheap stocks to buy now under $5:
— Sundial Growers Inc. (SNDL)
— Western Copper and Gold Corp. (WRN)
— New Gold Inc. (NGD)
— Uphealth Inc. (UPH)
— ContextLogic Inc. (WISH)
— Ambev SA (ABEV)
— Moneylion Inc. (ML)
— Paysafe Ltd. (PSFE)
— Up Fintech Holding Ltd. (TIGR)
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9 Best Cheap Stocks to Buy Now Under $5 originally appeared on usnews.com
