These stocks under $10 won’t break the bank.
The S&P 500 is off to a shaky start in 2022, providing buying opportunities in high-quality stocks. Unfortunately, quality stocks trading for less than $10 per share are few and far between. Stocks priced at this level can be a red flag for investors that something serious is wrong with a company. Many of these stocks have challenged underlying business models or difficult near-term outlooks. However, the CFRA Research analyst team has identified seven cheap, high-quality stocks that could be excellent buying opportunities for frugal investors. Here are seven of the best stocks to buy under $10, according to CFRA.
Arlo Technologies Inc. (ticker: ARLO)
Arlo Technologies produces smart connected devices, including security cameras, baby monitors and outdoor lights. Analyst Keven Young says Arlo has an attractive valuation, and the company has done an excellent job of shifting its business toward a high-margin services model. In the first quarter, Arlo reached $101 million in annual recurring revenue and reported 1.27 million paid accounts, up 132% from a year ago. Young says Arlo is also increasing average revenue per user, and he projects 15.5% revenue growth in 2022 and 29% in 2023. CFRA has a “buy” rating and $13 price target for ARLO stock, which closed at $6.35 on June 22.
Ericsson supplies network infrastructure and services to the telecommunications industry. In March, Ericsson disclosed that the U.S. Justice Department had accused the company of compliance breaches related to a 2019 settlement regarding allegations of misconduct by Ericsson in Iraq from 2011 through 2019. Despite the regulatory uncertainty, analyst Jun Zhang Tan says global investment in 5G network upgrades is generating sales growth momentum for Ericsson’s Networks business. Tan says the 5G investment cycle is still in the early stages and will involve more investment than previous upgrade cycles. CFRA has a “buy” rating and $12 price target for ERIC stock, which had a closing price of $7.70 on June 22.
New York Community Bancorp Inc. (NYCB)
New York Community Bancorp is the largest U.S. thrift bank and specializes in rent-regulated, non-luxury, multi-family lending. Analyst Michael Elliott says he is bullish on New York Community because of its growing profitability, its liability-sensitive balance sheet and its attractive valuation. Elliott says the bank’s pending buyout of Flagstar Bancorp Inc. (FBC), a Michigan-based bank holding company, could help it generate additional earnings, recognize significant cost savings and pursue share buybacks. Elliott expects the Flagstar deal to close in mid-to-late 2022 and projects 30% to 40% revenue growth for New York Community this year. CFRA has a “buy” rating and $11 price target for NYCB stock, which closed at $8.67 on June 22.
Oatly Group AB (OTLY)
Oatly is the world’s largest oat milk producer. With the stock trading under $5 per share, analyst Arun Sundaram says Oatly has a compelling valuation relative to more high-profile competitors such as Beyond Meat Inc. (BYND). Sundaram says Oatly’s recent revenue growth slowdown is largely due to temporary capacity restraints and other COVID-19-related disruptions. In fact, the company has projected a 50% increase in production by the end of 2022. Sundaram estimates revenue growth will accelerate to 40% in 2022 and 55% in 2023. CFRA has a “buy” rating and $6 price target for OTLY stock, which closed at $3.80 on June 22.
Pitney Bowes Inc. (PBI)
Pitney Bowes specializes in mailroom automation systems and other facility management services. Analyst John Freeman says Pitney Bowes has significant valuation upside even if the company’s turnaround plan is only moderately successful. Freeman says Pitney’s legacy mailroom automation business is challenged, but the company’s bold moves to divest underperforming businesses and streamline those in secular decline has helped the company focus on investing in e-commerce cloud apps and robotics. These investments are already showing signs of success, and Freeman projects three-year compound annual revenue growth of 7%. CFRA has a “strong buy” rating and $9 price target for PBI stock, which closed at $3.71 on June 22.
Telefónica SA (TEF)
Telefónica is the leading telecommunications company in Spain. Analyst Adrian Ng says Telefónica has made several structural adjustments that have helped reduce its debt load and streamline its business. Telefónica has divested its Central America business and acquired E-Plus in Germany and GVT in Brazil. The company has also combined its U.K. assets with those of Liberty Global PLC (LBTYA) in a deal to create a joint venture that included a $3 billion payment for Telefónica. Telefónica’s dividend yield is particularly attractive, at 8.2%. CFRA has a “buy” rating and $5.50 price target for TEF stock, which closed at $4.91 on June 22.
Telecom Italia SpA (TIIAY)
Telecom Italia is the leading fixed-line and wireless telecommunications provider in Italy. Ng says Telecom Italia has effectively rejected a $12 billion buyout bid by KKR & Co. Inc. (KKR) by refusing to grant KKR access to its books. The company’s updated long-term strategic plan involves splitting Telecom Italia into a NetCo that manages its networks and a ServCo that contains the Consumer, Enterprise and Brazil segments. Competition in the Italy market will likely continue to drag revenue lower, but Ng says the stock is oversold. CFRA has a “buy” rating and $3.80 price target for TIIAY stock, which had a closing price of $2.70 on June 22.
7 best cheap stocks to buy under $10:
— Arlo Technologies Inc. (ARLO)
— Ericsson (ERIC)
— New York Community Bancorp Inc. (NYCB)
— Oatly Group AB (OTLY)
— Pitney Bowes Inc. (PBI)
— Telefónica SA (TEF)
— Telecom Italia SpA (TIIAY)
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Update 06/23/22: This story was published at an earlier date and has been updated with new information.