These $5 stocks may have major upside.
Some of the top-performing stocks of the past decade have gone on such big runs that their share prices have gotten very steep. Amazon.com Inc. (ticker: AMZN) and Alphabet Inc. (GOOG, GOOGL), for example, both have share prices above $2,500. Investors looking for bargain stocks trading under $5 find themselves searching through plenty of bad investments. A low share price is often an indication a company is struggling and a stock is a risky bet, but there are a handful of hidden $5 gems as well. Here are eight of the best cheap stocks to buy now for under $5, according to Bank of America.
Banco Bradesco SA (BBD)
Banco Bradesco is Brazil’s second-largest private sector lender. Analyst Mario Pierry says the company’s 12% year-over-year net interest income growth and 10% quarterly insurance revenue growth were highlights of Bradesco’s earnings report in February. Loan growth was up 20% in the quarter, but Pierry says Bradesco’s 2022 net income growth guidance of 8% was below expectations. Despite the lackluster guidance, Pierry says the stock is a compelling value given its defensive earnings profile. Even after a 21% year-to-date gain, Bradesco shares trade well under $5. Bank of America has a “buy” rating and $4.90 price target for BBD stock, which closed at $4.04 on March 3.
Telefonica SA (TEF)
Telefonica is the leading telecommunications company in Spain. Analyst David Wright says Telefonica’s global business strategy should bear fruit in 2022. Wright says consolidation in the Brazil market will stabilize prices, while an improved network in Germany should help Telefonica gain market share from competitors. He says Telefonica will continue to deal with competitive pressures in Spain, but industry consolidation could be a positive catalyst in 2022. Telefonica also has a 6.4% dividend, a rarity for a stock trading under $5. Bank of America has a “buy” rating and $6.58 price target for TEF stock, which closed at $4.57 on March 3.
B2Gold Corp. (BTG)
Gold prices recently reached their highest level in more than a year, following the Russian invasion of Ukraine, which is good news for global gold producer B2Gold. Analyst Michael Jalonen says B2Gold is focused on organic growth. The company’s latest guidance calls for 2022 gold production of between 990,000 and 1.05 million ounces. With a share price of around $4.20, B2Gold shares trade at just over 10 times Jalonen’s 2022 earnings estimates. The stock also trades at roughly a 20% price-to-net-asset-value discount to mid-tier gold producer peers. Bank of America has a “buy” rating and $5.85 price target for BTG stock, which closed at $4.22 on March 3.
Cazoo Group Ltd. (CZOO)
Cazoo is a direct-to-consumer online car retailer focused primarily on the U.K. market. Online auto retailer stocks have taken a beating in the past three months, and shares of Cazoo have dropped more than 50% to less than $3. Analyst David Amira says he remains optimistic about Cazoo’s secular growth story as the company expands outside the U.K. He says Cazoo is targeting a large addressable European auto market that is still in the early stages of an online transition. Bank of America has a “buy” rating and $6.60 price target for CZOO stock, which closed at $2.95 on March 3.
Paysafe Ltd. (PSFE)
Paysafe is a payment processing solutions company for e-commerce, online gaming and other industries. Paysafe went public via a special purpose acquisition company, or SPAC, merger in March 2021 and finished 2021 down more than 74% on the year. Paysafe has been unable to stop the bleeding so far in 2022 and is already down another 25% to around $3. Paysafe’s quarterly earnings reports and guidance have repeatedly disappointed the market, but analyst Jason Kupferberg remains optimistic the company can transition to profitability starting in 2022. Bank of America has a “buy” rating and $6 price target for PSFE stock, which closed at $3.17 on March 3.
Bright Health Group Inc. (BHG)
Bright Health is a managed-care organization that is expanding its health care focus outside of Affordable Care Act exchanges and into Medicare Advantage and small-group health insurance. Analyst Kevin Fischbeck says Bright’s surprisingly strong 2022 revenue guidance is driven by outperformance from NeueHealth and improving health plan membership growth. In the longer term, Fischbeck says, Bright appears to be shifting its focus from growth to capital discipline, including scrapping plans to expand into additional U.S. states. He projects Bright can reach breakeven profitability by 2024. Bank of America has a “buy” rating and $10.50 price target for BHG, which closed at $2.20 on March 3.
Kosmos Energy Ltd. (KOS)
Kosmos is an oil and gas exploration and production company with operations primarily in the U.S. and Ghana. Analyst Matthew Smith says lower capital expenditures in Africa’s Tortue gas field, accretive deals in Ghana and the roll-off of hedges all contributed to Kosmos’ bullish free cash flow guidance for 2022. Crude oil prices topped $100 for the first time since 2014 following Russia’s invasion of Ukraine, and Smith says Kosmos is well positioned to rapidly improve its balance sheet and create value for investors. Bank of America has a “buy” rating and $6.40 price target for KOS stock, which closed at $5.43 on March 3. While the current price is above $5, Kosmos makes this list because it did not trade above $5 for over two years before crossing the line March 1.
Dingdong Ltd. (DDL)
Dingdong is a fast-growing Chinese e-commerce company with a focus on fresh groceries. Dingdong shares have taken a hit since the company completed its initial public offering in June 2021, dropping from an all-time high of $46 down to under $5 as both Chinese and U.S. regulators have cracked down on U.S.-listed Chinese stocks. Despite the underperformance, analyst Joyce Ju is projecting 48% revenue growth for Dingdong in 2022. A high-risk bet on Dingdong at under $5 could generate tremendous long-term upside. Bank of America has a “buy” rating and $23.80 price target for DDL stock, which closed at $4.70 on March 3.
8 best cheap stocks to buy now under $5:
— Banco Bradesco SA (BBD)
— Telefonica SA (TEF)
— B2Gold Corp. (BTG)
— Cazoo Group Ltd. (CZOO)
— Paysafe Ltd. (PSFE)
— Bright Health Group Inc. (BHG)
— Kosmos Energy Ltd. (KOS)
— Dingdong Ltd. (DDL)
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8 Best Cheap Stocks to Buy Now Under $5 originally appeared on usnews.com
Update 03/04/22: This story was published at an earlier date and has been updated with new information.
