These stocks under $10 won’t break the bank.
The S&P 500 struggled 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 Morningstar analyst team has identified nine cheap, high-quality stocks that could be excellent buying opportunities in 2023 for frugal investors. Here are nine of the best cheap stocks to buy under $10, according to Morningstar.
Lloyds Banking Group PLC (ticker: 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 it is now a low-risk play on British retail and commercial banking. Kammer says the outlook for the U.K. economy is uncertain heading into 2023, but Lloyds’ net interest margin tailwinds from higher interest rates outweigh risks associated with a potential economic downturn. He says Lloyds will disproportionately benefit from higher rates compared to peers. Morningstar has a “buy” rating and $3.80 fair value estimate for LYG stock, which closed at $2.41 on Jan. 18.
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says all of Barclays’ segments contributed positively to a solid third quarter for the bank, which included 9% total income growth and a large reversal on litigation and conduct charges. Inflation, a weak British pound and an uptick in investment spending have contributed to Barclays’ rising expenses, but Kammer says the bank’s credit metrics remain impressive. He is also bullish on the bank’s leading position in the U.K. credit card market. Morningstar has a “buy” rating and $10.10 fair value estimate for BCS stock, which closed at $9.01 on Jan. 18.
Banco Bradesco SA (BBD)
Banco Bradesco is one of Brazil’s largest banks. Analyst Michael Miller says higher credit costs have pressured Banco Bradesco’s profits, and growth in the bank’s fee-based income has stagnated. However, Miller says the bank has a strong balance sheet and its commercial loans and mortgage businesses have outperformed throughout most of the past two years. He says aggressive rate hikes appear to be bringing inflation under control in Brazil, a development which may eventually pressure Banco Bradesco’s net interest margins but help support its credit quality. Morningstar has a “buy” rating and $4 fair value estimate for BBD stock, which closed at $2.87 on Jan. 18.
Nokia Corp. (NOK)
Nokia is a global telecom equipment and digital map data vendor that also licenses intellectual property to third parties. Analyst Matthew Dolgin says licensing disputes weighed on Nokia’s revenue growth throughout 2022. Given the high margins of the company’s intellectual property business, these licensing disputes have also had a negative impact on the company’s total operating margins. However, Dolgin says Nokia shares are undervalued and should continue to benefit from a massive global 5G wireless network upgrade cycle that is still in the early stages. Morningstar has a “buy” rating and $5.60 fair value estimate for NOK stock, which closed at $4.78 on Jan. 18.
Wipro Ltd. (WIT)
Wipro is a global information technology services provider that offers software implementation assistance, digital transformation consulting and other IT services. Analyst Julie Bhusal Sharma says Wipro faces stiff competition but benefits from high switching costs. Sharma says Wipro has specialized knowledge of its customers’ industry verticals, making it disruptive for customers to switch to other providers. In addition, Sharma says Wipro’s labor arbitrage model creates a cost advantage relative to competitors. In the long term, she says higher-value offerings and automated solutions will be earnings tailwinds. Morningstar has a “buy” rating and $5.50 fair value estimate for WIT stock, which closed at $4.97 on Jan. 18.
Sirius XM Holdings Inc. (SIRI)
Sirius XM Holdings is a leading provider of satellite and internet radio services, largely to the auto industry. Analyst Neil Macker says Sirius XM posted its best quarterly net subscriber additions since 2020 in the third quarter, an impressive performance given the weak advertising market. Macker says SiriusXM’s average revenue per user momentum and low churn set the company up well for 2023 as long as inflation impacts are manageable. In addition, 37% of new car buyers convert free SiriusXM trials to paid subscriptions. Morningstar has a “buy” rating and $8.25 fair value estimate for SIRI stock, which closed at $5.84 on Jan. 18.
Telefonica SA (TEF)
Telefonica is the largest Spanish telecommunications company. Analyst Javier Correonero says Telefonica navigated a difficult inflationary environment relatively well in 2022, even reporting 3.8% organic revenue growth in the third quarter. Correonero says the solid performance is particularly impressive given telecommunications companies typically have a difficult time passing on higher costs to customers. Telefonica already has more than 60% of its energy costs hedged in 2023, and Correonero says the company’s Brazil and Germany businesses have been strong growth sources in recent quarters. Morningstar has a “buy” rating and $4.90 fair value estimate for TEF stock, which closed at $3.84 on Jan. 18.
Snap Inc. (SNAP)
Snap’s Snapchat social media platform has more than 363 million daily active users. Analyst Ali Mogharabi says Snap benefits from a large user base that is still growing by 19% as of the third quarter. However, Snap also reported a $360 million net loss in the most recent quarter, and Mogharabi says there’s no guarantee Snap will ever effectively and consistently monetize its users. He says Snap is facing “overwhelming” competition, but its impressive growth profile makes it attractive after shedding a full 81% of its value in 2022 alone. Morningstar has a “buy” rating and $27 fair value estimate for SNAP stock, which closed at $9.41 on Jan. 18.
Credit Suisse Group AG (CS)
Credit Suisse is a Swiss financial services company that specializes in investment banking and wealth management. Analyst Johann Scholtz says Credit Suisse’s recent client outflows are “concerning,” and S&P recently downgraded the company’s credit rating to BBB-, just one notch above non-investment grade status. Scholtz says the recent downturn in Credit Suisse’s wealth management unit is disappointing given the segment has long been a strong, quality business. Despite the risks, he says Credit Suisse shares are attractively valued after falling 83% in the past decade. Morningstar has a “buy” rating and $4.50 fair value estimate for CS stock, which closed at $3.49 on Jan. 18.
9 of the best cheap stocks to buy under $10:
— Lloyds Banking Group PLC (LYG)
— Barclays PLC (BCS)
— Banco Bradesco SA (BBD)
— Nokia Corp. (NOK)
— Wipro Ltd. (WIT)
— Sirius XM Holdings Inc. (SIRI)
— Telefonica SA (TEF)
— Snap Inc. (SNAP)
— Credit Suisse Group AG (CS)
More from U.S. News
Update 01/19/23: This story was previously published at an earlier date and has been updated with new information.