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 stock market pullback has created some potential buying opportunities for long-term investors. Quality stocks trading for less than $10 are few and far between. Stocks priced in that range can be red flags for investors that something is seriously wrong. Many of these companies have challenged business models or difficult near-term outlooks. Fortunately, the Morningstar analyst team has identified eight cheap, high-quality stocks that could be excellent buying opportunities for frugal investors. Here are eight stocks for less than $10 per share that have room to run, according to Morningstar.
Banco Santander SA (ticker: SAN)
Banco Santander is a large Spanish bank with a sizable international presence. Analyst Johann Scholtz says Santander reported fiscal 2021 earnings that were 23% higher than its 2019 earnings, yet the stock is still trading for much less than its 2019 levels. Scholtz says concerns over Santander’s capitalization are the primary reason why it has lagged behind its European banking peers. He says Santander’s earnings have been stable compared to peers, however, thanks in part to its relatively low exposure to investment banking and home loans. Morningstar has a “buy” rating and a $4.50 fair value estimate for SAN stock, which closed at $3.43 on March 16.
Lloyds Banking Group PLC (LYG)
Lloyds Banking Group is a diversified bank and insurance provider based in the U.K. Lloyds underwent a major restructuring in 2011, and analyst Niklas Kammer says the new company is now a low-risk play on British retail and commercial banking. Unfortunately, mortgage pricing is under pressure in the U.K. in a fiercely competitive environment, and mortgage loans represent about two-thirds of the company’s customer lending. In response to mortgage market pressures, Kammer says Lloyds has now moved its focus to financial planning, credit card loans, and small and medium-size business loans. Morningstar has a “buy” rating and a $3.70 price target for LYG stock, which closed at $2.53 on March 16.
BBVA SA (BBVA)
BBVA is the third-largest bank in Spain and has international operations in Mexico and Latin America. BBVA shares took a hit in November 2021 when it announced plans to purchase the remaining interest in its 50%-owned Turkish subsidiary Garanti BBVA. Scholtz says investors were concerned about additional exposure to Turkey, but Garanti’s 28% fiscal 2021 profit growth demonstrates the high quality of its business. Scholtz says BBVA has more profitability potential than peers, thanks to exposure to attractive banking markets. Citibanamex, which is Citibank’s operation in Mexico, is also up for sale, and BBVA hasn’t ruled out an acquisition deal. Morningstar has a “buy” rating and a $7.30 fair value estimate for BBVA stock, which closed at $5.91 on March 16.
Telefonaktiebolaget LM Ericsson (ERIC)
Ericsson is a leading supplier of network infrastructure and services to the telecommunication industry. In early March, Ericsson said that the U.S. Justice Department has accused the company of compliance breaches related to a 2019 settlement regarding allegations of misconduct by Ericsson in Iraq from 2011 through 2019. Analyst Mark Cash says the new disclosure could be a “serious step back in Ericsson’s turnaround story.” With shares down 18.2% year to date as of March 16, he says the stock has significant valuation upside if the issue is resolved. Morningstar has a “buy” rating and an $11.80 price target for ERIC stock, which closed at $8.89 on March 16.
Nokia Corp. (NOK)
Nokia is one of the world’s top infrastructure equipment suppliers to the global wireless industry. Cash says Nokia’s recent decision to reinstate its capital return program was the right move, even as the company invests heavily in 5G network, optical network, enterprise network and cloud services technologies. Cash anticipates that 5G network tail winds will drive revenue growth acceleration in 2022. He is cautious about Nokia’s long-term outlook following the global 5G network upgrade cycle, however, after Nokia’s mobile networks revenue dropped 13% in the fourth quarter. Morningstar has a “buy” rating and a $5.70 price target for NOK stock, which closed at $5.26 on March 16.
Telefonica SA (TEF)
Telefonica is the largest Spanish telecom company. Analyst Javier Correonero says Telefonica has shifted its strategy to focus on four key markets: Spain, the U.K., Germany and Brazil. Correonero says Telefonica is making the right move by divesting or restructuring its infrastructure assets and Latin American operations outside of Brazil and using proceeds to pay down debt. While the restructuring efforts will require patience from investors, he says it will ultimately result in higher cash flow, more dividend visibility and lower currency exposure. Morningstar has a “buy” rating and a $5.80 fair value estimate for TEF stock, which closed at $4.49 on March 16.
Sirius XM Holdings Inc. (SIRI)
Sirius XM Holdings provides satellite and internet radio services. Sirius finished 2021 on a high note, reporting a modest earnings beat despite a challenging auto market. Analyst Neil Macker says constrained U.S. auto inventory will likely continue to weigh on paid promotional subscriber numbers in 2022, but those numbers should start to improve in the second half of the year. Macker says Sirius XM subsidiary Pandora’s increased focus on podcasts could expand its user base, but the space is highly competitive, so the company may have difficulty keeping up with more established companies. Morningstar has a “buy” rating and an $8 fair value estimate for SIRI stock, which closed at $6.21 on March 16.
Credit Suisse Group AG (CS)
Credit Suisse is a Swiss financial services company that specializes in investment banking and wealth management. Scholtz says the company’s full-year 2021 net loss of $1.7 billion was distorted by a number of “significant” or nonrecurring charges. Credit Suisse has now reported net losses in nine of the past 40 quarters, most of which the company blamed on one-time charges. For these reasons, Scholtz says it is becoming increasingly difficult to convince investors to look beyond these items at Credit Suisse’s strong core business. Morningstar has a “buy” rating and a $15.50 fair value estimate for CS stock, which closed at $7.98 on March 16.
Eight cheap stocks to buy under $10:
— Banco Santander SA (SAN)
— Lloyds Banking Group PLC (LYG)
— BBVA SA (BBVA)
— Telefonaktiebolaget L M Ericsson (ERIC)
— Nokia Corp. (NOK)
— Telefonica SA (TEF)
— Sirius XM Holdings Inc. (SIRI)
— Credit Suisse Group AG (CS)
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8 Best Cheap Stocks to Buy Under $10 originally appeared on usnews.com
Update 03/17/22: This story was published at an earlier date and has been updated with new information.
