U.S. stocks opened lower Thursday in what has been an up and down week, as investors try to weigh some better-than-expected earnings results against continued macroeconomic uncertainty. Apple AAPL, Amazon AMZN, Facebook FB, and Google parent Alphabet GOOGL will all grab the spotlight Thursday afternoon, one day after facing further antitrust probes in Washington.
Thursday morning also saw initial second quarter GDP data roll in that was brutal, but slightly better than expected. The U.S. economy shrank by 32.9% in Q2, based on initial Commerce Department estimates. This likely marks the bottom of the economic downturn since it features what will hopefully be the period with the most stringent lockdown measures.
Therefore, Wall Street might shake this figure off sooner than later, as people knew the second quarter was going to be rough. And this could slam home why many might remain in don’t fight the Fed mode, after Jerome Powell said Wednesday that it would continue to do all it can to support the U.S. economy.
Yet, with short-term interest rates near zero and long-term rates floating around all-time lows, the Fed chairman noted that more fiscal policy efforts are needed. This could put greater pressure on Congress to hammer out a second stimulus bill.
Despite the broader unknowns and a possible near-term pullback from tech and elsewhere, as Wall Street uses earnings as a chance to take home profits—like they did with Microsoft MSFT—investors should still be on the hunt for strong stocks to buy or add to their watchlists. And it’s worth noting that the second half earnings picture is slowly improving (also read: An Improving Earnings Outlook Despite Covid-19 Concerns)
With this in mind, let’s dive into three“cheap” stocks that are trading for under $20 per share that appear strong at the moment…
Digital Turbine, Inc. APPS
Prior Close: $12.52 USD
Digital Turbine works to connect OEMs, mobile operators, and publishers with advertisers and developers for “frictionless app and content discovery, user acquisition and engagement, operational efficiency and monetization opportunities.” The Austin, Texas-based firm has landed on Deloitte's Technology Fast 500 list multiple times and it completed in early March its acquisition of Mobile Posse.
The deal helps create a more robust offering for clients, by adding Mobile Posse’s “suite of highly-engaging content discovery products” to its portfolio. The firm’s Q4 FY20 revenue, which it posted in early June, jumped 45%, with full-year sales up 34%. This performance came on top of the year-ago period’s 39% sales growth and was mostly organic since it only included a month of Mobile Posse operations.
APPS has climbed from under $2 in the fall of 2018 to its current price of $12.50 a share. This includes its 215% jump from the market’s March 23 lows, which destroys its industry’s 55% climb. Along with its cheap price tag, Digital Turbine trades at a solid discount compared to its industry, as it has for the last several years.
Our Zacks estimates call for APPS Q1 sales to surge 59%, with FY21 projected to come in 52% higher. Meanwhile, its adjusted earnings are projected to surge 80% in Q1 and 100% for the year to reach $0.40 a share. Digital Turbine operates within a booming market and it earns a Zacks Rank #2 (Buy) right now, alongside its “B” grade for Growth in our Style Scores system. The content discovery and delivery firm is set to report its Q1 results on August 5.
Zix Corporation ZIXI
Prior Close: $6.73 USD
Zix is an email security firm that specializes in email encryption, data loss and threat protection, and other cybersecurity offerings. ZIXI stock is up over 100% since the market’s lows. Despite the climb, the stock hovers 30% below its July 2019 highs, which could give it far more room to run if it’s able to impress Wall Street with its second quarter 2020 results that are due out on August 5. Along with its cheap shares, Zix trades at a significant discount against its industry at the moment, at 1.7X forward 12-month sales vs. 7.1X.
Peeking ahead, ZIXI’s second quarter revenue is projected to jump 14.4%, with its FY20 sales expected to climb over 23%. Better still, ZIXI’s adjusted quarterly earnings are expected to surge over 27%, with its full-year EPS figure set to soar 138% to $0.57 a share.
The email security firm’s earnings and revenue are expected to continue to grow in 2021. Plus, Zix’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now, which goes well with its “B” grade for Value and an “A” for Growth in our Style Scores system.
The cloud email security solutions provider is also part of an industry that rests in the top 23% of our more than 250 Zacks industries. And Zix is poised to benefit from the ongoing need for cybersecurity. “The COVID-19 pandemic is accelerating digital transformation and is increasing the need for robust business communications solutions that ensure organizations remain secure, compliant and productive,” CEO David Wagner said in prepared Q1 remarks.
DouYu International DOYU
Prior Close: $12.55 USD
DouYu is a live streaming firm that focuses mostly on the video gaming and e-sports market in China. The company went public in July 2019 and it’s drawn comparisons to Amazon’s Twitch for its ability to allow people to watch video games live, which is a massive and growing market. DouYu is backed by Chinese social media and gaming powerhouse Tencent TCEHY and it holds a Zacks Rank #2 (Buy) right now.
DOYU operate across both PC and mobile apps and it says it “has gained coveted access to a wide variety of premium eSports content.” This is great news as China represents a growth market within the global video space that is projected to soar from $159 billion in 2020 to over $200 billion by 2023. Investors have shown love for the stock recently, with DOYU shares up 100% since April 1. Despite its climb, DOYU trades at a discount against its industry that includes Activision Blizzard ATVI and Electronic Arts EA and its own highs.
DouYu outperformed the high-end of its Q1 FY20 sales guidance in late May, with revenue up 53%. Its mobile monthly average users climbed 15% to 56.6 million and its quarterly average paying user count popped 26% to 7.6 million. Plus, the company’s margins hit a record high. DouYu also topped our adjusted earnings estimate by 45%.
The company is set to release its second quarter financial results on August 10, with our estimates calling for 25% revenue growth and a 333% spike in adjusted earnings. DouYu’s fiscal 2020 revenue is projected to climb 37%, with FY21 expected to jump another 23% higher to hit $1.78 billion. And its adjusted FY20 EPS figure is projected to skyrocket 223% to $0.55 a share, with FY21 set to surge all the way to $0.72 per share.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
Electronic Arts Inc. (EA) : Free Stock Analysis Report
Tencent Holding Ltd. (TCEHY) : Free Stock Analysis Report
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Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Zix Corporation (ZIXI) : Free Stock Analysis Report
Digital Turbine, Inc. (APPS) : Free Stock Analysis Report
DouYu International Holdings Limited Sponsored ADR (DOYU) : Free Stock Analysis Report
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