At less than $10 per share, these stocks won’t break the bank.
The S&P 500 is off to a shaky start to 2022, but the market pullback has created some potential buying opportunities. A stock price under $10 can be a red flag for investors that something is seriously wrong with a company, such as a broken business model or a difficult market outlook. Low-priced stocks are also often extremely volatile and unpredictable. However, there are always a handful of high-quality stocks that represent excellent buying opportunities for frugal long-term investors. Here are seven cheap stocks to buy for under $10, according to the CFRA analyst team.
New Oriental Education & Technology Group Inc. (ticker: EDU)
New Oriental Education & Technology is one of the largest education companies in China. New Oriental shares have taken a beating in the past year, dropping from 52-week highs of near $20 down to under $2 after Chinese regulators cracked down on for-profit after-school tutoring companies. The regulatory environment in both China and the U.S. remains a major uncertainty, but analyst Aaron Ho says New Oriental’s cash position and online teaching capabilities will help the company adjust its business model to comply with new regulations and remain profitable. CFRA has a “buy” rating and $5 price target for EDU stock, which closed at $1.52 on Feb. 11.
Oatly Group AB (OTLY)
Oatly is the world’s largest oat milk producer. Analyst Arun Sundaram says Oatly’s valuation is “too attractive to ignore” at less than $7 per share. Sundaram is projecting 10-year compound annual sales growth of 33% for Oatly, compared with 26% annual growth for Beyond Meat Inc. (BYND). However, he says Oatly trades at a significantly discounted enterprise value-to-sales ratio relative to Beyond Meat. Sundaram says Oatly’s near-term headwinds are temporary and are related to production capacity rather than underlying demand for plant-based milk or oat milk. Oatly’s products are available in 74,000 retail and 72,000 food service locations, adding more than 50,000 locations in the first three quarters of 2021. CFRA has a “buy” rating and $15 price target for OTLY, which closed at $7.33 on Feb. 11.
Pitney Bowes Inc. (PBI)
Pitney Bowes specializes in mailroom automation systems and other facility management services. Analyst John Freeman says Pitney has a “very attractive valuation” even if the company’s turnaround efforts are only moderately successful. Freeman says Pitney Bowes is facing uncertainty and disruption in its legacy mailroom automation business. But management has been aggressive in divesting underperforming assets, streamlining segments that are facing secular pressures and investing in growth opportunities in e-commerce cloud applications and robotics. Freeman says these investments have produced positive results so far. CFRA has a “strong buy” rating and $9 price target for PBI stock, which closed at $4.91 on Feb. 11.
TAL Education Group (TAL)
TAL Education is another Chinese education stock that has struggled thanks to the regulatory crackdown. Like New Oriental, TAL has the balance sheet flexibility and digital capabilities to reinvent itself to be a thriving, regulatory-compliant company, Ho says. Despite government supply restrictions, Ho projects demand for after-school tutoring services will remain inelastic in China. He predicts this dynamic will lead to higher prices, supporting TAL’s margins. Even after shutting down tutoring services for kindergarten through ninth grade, Ho projects TAL’s revenue will be “flattish” year over year in fiscal 2022. CFRA has a “buy” rating and $10 price target for TAL stock, which closed at $3.23 on Feb. 11.
Telefonica SA (TEF)
Telefonica is the leading telecommunications company in Spain. Analyst Adrian Ng says Telefonica has made several strategic changes to position itself better for the future, including buyouts of E-Plus in Germany and GT in Brazil and an exit of the Central American market. Telefonica will receive a cash infusion from its joint venture deal with Liberty Global PLC (LBTYA) in the U.K. In addition, Telefonica’s most recent dividend payment in December suggests an extremely high 8.8% yield, but the company’s payout varies on a quarterly basis. CFRA has a “buy” rating and $5.50 price target for TEF stock, which closed at $4.90 on Feb. 11.
Telecom Italia (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” strategic plan aims to shift focus from business stabilization to long-term growth. The initiative is focused on improving equity free cash flow, reducing debt and distributing at least 20% of equity free cash flow to investors via dividends. Telecom Italia’s largest shareholder, Vivendi, has objected to a recent buyout offer by KKR & Co. (KKR), saying the $12.2 billion bid is too low. CFRA has a “buy” rating and $5.70 price target for TIIAY stock, which closed at $4.76 on Feb. 11.
Tencent Music Entertainment Group (TME)
Tencent Music is a leading online music streaming platform in China and is the parent company of QQ Music, KuGou Music and WeSing. Tencent Music shares are down 76.2% in the past year as Chinese and U.S. regulators tighten restrictions on U.S.-listed Chinese tech stocks. Analyst Ahmad Halim says the severe sell-off has brought Tencent Music’s valuation to an attractive level. He says Tencent Music is currently dominating its key music markets, but it is facing growing competition from NetEase Cloud Music, TikTok and others. CFRA has a “buy” rating and $9 price target for TME stock, which closed at $6.02 on Feb. 11.
The 7 best cheap stocks to buy under $10:
New Oriental Education & Technology Group Inc. (EDU) Oatly Group AB (OTLY) Pitney Bowes Inc. (PBI) TAL Education Group (TAL) Telefonica SA (TEF) Telecom Italia (TIIAY) Tencent Music Entertainment Group (TME)
More from U.S. News
The 10 Biggest Tech Companies in the World
The 8 Best Cryptocurrency Wallets
7 Bank Stocks to Buy for the Dividends
7 Best Cheap Stocks to Buy Under $10 originally appeared on usnews.com
Update 02/14/22: This story was published at an earlier date and has been updated with new information.
