Stocks jumped again Tuesday, as part of the market’s 25% rally from its March 23 lows on continued optimism surrounding the coronavirus. Clearly, uncertainty remains and the full economic damage won’t show up until at least the second quarter.
That said, the market is forward-looking and governments around the world and in the U.S. are slowly starting to reopen parts of their economies. On top of that, investors have been pleased with recent results from some of the biggest names in tech, including Amazon AMZN and Microsoft MSFT (also read: Tech Sector Shows its Earnings Power).
Wall Street seems to have priced-in what they viewed as the worst of the damage, and longer-term investors will likely look back in a year from now and find today’s prices cheap, even if stocks fall again.
With this in mind, let’s dive into three actual “cheap” stocks trading under $10 a share that investors might want to think about buying as the market continues its climb on coronavirus optimism…
Zynga Inc. ZNGA
Prior Close: $7.47 USD
Zynga is a mobile video game powerhouse with titles from FarmVille to Words with Friends. The firm also has strategic licenses with the likes of Game of Thrones and rolled out a new game on Snapchat’s SNAP gaming platform last year. ZNGA stands to grow as part of the ongoing expansion of the global gaming market that is expected to pull in nearly $200 billion by 2022, according to market analysts at New Zoo. And investors should know that mobile gaming is expected to account for roughly half of the entire market.
The San Francisco-based firm’s fiscal 2019 revenue surged 465%. ZNGA also saw its operating cash flow jump 56% to $263 million, which marked its strongest performance since 2011. Zynga shares have climbed 25% in 2020, against the S&P 500’s 12% decline, as investors see the mobile gaming firm as immune to the coronavirus. Overall, ZNGA stock has soared over 100% in the last two years and popped over 2% Tuesday to near its 52-week highs.
Our current Zacks estimates call for ZNGA’s adjusted Q1 earnings to surge from a loss of -$0.12 a share in the year-ago period to +$0.05, on nearly 13% stronger sales. Better yet, Zynga’s adjusted full-year earnings are projected to soar over 2,000% from $0.01 to $0.23 a share, with 2021 projected to reach $0.31. ZNGA is also expected to see its revenue climb 12.9% and 13.7%, respectively over this stretch to hit $2.01 billion in FY21. This growth would come on top of 2019’s 46% and easily top 2018’s 5% sales expansion.
ZNGA’s earnings revisions activity has remained positive and it earns an “A” grade for Growth in our Style Scores system. The company is also part of a gaming industry that rests in the top 25% of our more than 250 Zacks industries. Zynga, which is a Zacks Rank #3 (Hold) right now, is set to report its Q1 results after the market closes on Wednesday, May 6, which means investors might want to wait for updated guidance, or a possible post-earnings pullback before they think about buying.
SmileDirectClub, Inc. SDC
Prior Close: $6.95 USD
SmileDirectClub has had a rough go at it since it went public in September for $23 a share. The company sells its orthodontics directly to consumers and competes against industry heavyweight Align Technology Inc. ALGN, which makes Invisalign. SDC fiscal 2020 revenue jumped over 77% to $750 million, with Q4 sales up 53.1%. SDC announced in late April that it was issued a patent for its in-store “SmileShop” intellectual property for 18 years.
The company also said that it plans to “slowly reopen its SmileShops” starting in May. Shares of SmileDirectClub have surged roughly 75% in the last month from under $4 a share to their current price—SDC jumped again on Tuesday. Along with its cheap price, SDC is trading at a discount compared to the S&P 500 in terms of forward 12-month sales at 2.7X, against the S&P 500’s 3.2X average.
The teeth-straightening firm’s sales growth is expected to slow after a strong 2019, and will be negatively impacted by the coronavirus. That said, SDC’s FY20 revenue is projected to jump 19%, with fiscal 2021 projected to climb 36% higher to reach $1.21 billion.
Meanwhile, its adjusted losses are projected to shrink significantly both this year and next. Some might want to take a chance on SmileDirectClub as a bet on the continued disruption of traditional orthodontics. SDC is a Zacks Rank #3 (Hold) right now and is set to report its Q1 results on May 13.
Prior Close: $7.71 USD
Cloudera is an enterprise data cloud firm that completed its merger with big-data peer Hortonworks in January 2019. The firm’s new Cloudera Data Platform made its debut on Microsoft Azure Marketplace last fall, which should provide strong exposure. Then in January of 2020, Rob Bearden took over as chief executive after previously co-founding and running Hortonworks.
CLDR topped our Q4 fiscal 2020 estimates in March, with the company’s annualized recurring revenue up 11% to $731.2 million. Bearden said on Cloudera’s Q4 earnings call that it “will transform from a mostly on-premise enterprise data management vendor to a true hybrid multi-cloud data platform company… CDP Public Cloud services will reflect our competitive advantage in addressing the full lifecycle of data.”
Cloudera’s consensus earnings estimates for fiscal 2021 and 2022 have soared since it reported. This helps CLDR earn a Zacks Rank #1 (Strong Buy) at the moment, alongside a “B” grade for Growth in our Style Scores system. Our Zacks estimates call for CLDR’s revenue to jump 8% this year and another 9% in FY22 to reach $935.63 million
Cloudera shares have failed to find their footing overall. But they jumped on Tuesday and have traded at nearly $12 a share in the past 12 months. This might make some investors want to take a chance on this “cheap” enterprise data cloud stock.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
Zynga Inc. (ZNGA) : Free Stock Analysis Report
Snap Inc. (SNAP) : Free Stock Analysis Report
Cloudera, Inc. (CLDR) : Free Stock Analysis Report
SmileDirectClub, Inc. (SDC) : Free Stock Analysis Report
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