The stock market rally continued on Wednesday, with the Dow up 2% the S&P 500 up 1.3%. The S&P 500 has now popped over 9% in the last month as Wall Street grows more excited about the reopening of the global economy from its coronavirus lockdown.
The S&P 500 has surged roughly 37% from its March 23 lows and just pushed above 3,100 on Wednesday, while the blue-chip index rests over 26,000. The recent positivity comes as economies around the world start to reopen and U.S. jobless claim data trends in the right direction. And the recent protests and unrest around the U.S. have so far not deterred investors.
There is also talk of further U.S. government stimulus and Wall Street is likely to remain in “don’t fight the Fed” mode. Plus, there are signs that the economic recovery might be quick (also read: Three Reasons Why the Coronavirus Economic Recovery will be Quick).
With this in mind, investors might want to find some new stocks to add to their portfolios. Today we look at three “cheap” stocks trading under $10 a share that might be worth buying as the market continues to march higher on coronavirus reopening optimism and more…
DouYu International DOYU
Prior Close: $9.42 USD (end of regular trading Wednesday, June 2)
DouYu International is a live streaming video game giant in China that is poised to expand as esports and video gaming streaming proliferate. The company can be loosely thought of as a Chinese Twitch, as it allows people to watch video games live like they are sports—Amazon AMZN bought Twitch in 2014 for roughly $1 billion and that looks like a steal these days. Overall, the global gaming market is projected to jump from $159 billion in 2020 to over $200 billion by 2023.
DouYu outperformed the high-end of its sales guidance last quarter and its margins hit a record high. Meanwhile, its mobile monthly average users jump by 15% in Q1 FY20 to 56.6 million, with its quarterly average paying user count up over 26% to 7.6 million. DouYu, which is backed by Chinese social media and gaming powerhouse Tencent TCEHY, has seen its stock price jump over 35% since it posted if first quarter financial results on May 26. DOYU shares jumped another 5% during regular trading Wednesday to push them up over 12% in 2020.
Despite the recent climb, the stock rests nearly 20% below the $11.50 a share it closed at on its first day of trading in July 2019. Looking ahead, our Zacks estimates call for DouYu’s fiscal 2020 sales to climb 29% to help lift its adjusted earnings by 200% to $0.51 a share. DOYU has topped our quarterly earnings estimates by an average of 128% in the trailing four periods.
DouYu’s longer-term earnings revisions positivity helps it earn a Zacks Rank #1 (Strong Buy) at the moment, alongside a “B” grade for Momentum in our Style Scores system. And along with its cheap price, DOYU is trading at 1.9X forward 12-month sales estimates. This marks a discount against the S&P 500’s 3.5X average and the gaming market’s 2.5X, which includes the likes of Glu Mobile Inc. GLUU, Activision Blizzard ATVI, and others.
Mitek Systems, Inc. MITK
Prior Close: $9.67 USD (end of regular trading Wednesday, June 2)
Mitek’s technology helps financial institutions and other enterprises verify a user’s identity during digital transactions, utilizing artificial intelligence and machine learning. MITK’s solutions are embedded in the apps, platforms, and websites of over 7,000 organizations to help perform tasks such as mobile check deposit, new account openings, and more. Mitek beat our second quarter fiscal 2020 earnings and revenue estimates at the end of April, with revenue up 16%
Mitek stock has skyrocketed over 75% since mid-March to crush its industry’s 28% jump. MITK is now up over 25% in 2020 and 10% over the last two years. The stock is also trading 10% off its 52-week highs, which could give it more room to run. MITK is also trading right at its one-year median in terms forward sales at 3.6X. Plus, Mitek is part of a highly-ranked Zacks industry and holds an “A” grade for Growth in our Style Scores system.
The San Diego-based company’s adjusted 2020 earnings are projected to surge 20% to $0.50 per share on 13% higher revenues. Mitek’s sales and earnings are both expected to climb another roughly 17% higher in 2021. MITK, which is a Zacks Rank #2 (Buy) right now, could continue to expand for years within our online and mobile-heavy economy.
SmileDirectClub, Inc. SDC
Prior Close: $8.66 USD (end of regular trading Wednesday, June 2)
SmileDirectClub sells its orthodontics offerings directly to consumers and competes against industry heavyweight Align ALGN. The firm’s first serval months as a public firm were largely disappointing. Despite its early struggles, SDC’s fiscal 2019 revenue jumped 77% to $750 million, with Q4 sales up 53%.
In late April, SmileDirect announced that was issued a patent for its in-store “SmileShop” intellectual property for 18 years. These in-store offerings supplement its online-based business, and investors should note that SDC also has in-store partnerships with CVS CVS and Walgreens WBA.
More recently, SDC at the end of May announced that its clear aligners will be “offered in-network through Anthem Blue Cross and Blue Shield’s newly-established remote orthodontic program.” On top of that, SDC said on June 2 that it was expanding its SmileShops through a new partnership in Asia. “With Watsons’s extensive network in Hong Kong, we are delighted to provide greater access to teeth straightening and enable customers to transform their smiles in a convenient way…” President of International at SmileDirectClub Kay Oswald said in a statement.
The firm is part of a growing telehealth and online-centered healthcare industry that includes the likes Teladoc TDOC and could continue to boom for years to come. Shares of SmileDirectClub have soared 115% since mid-March, from under $4 a share to their current price. And they still have miles to climb before they come close to their early trading highs of roughly $20 in September 2019.
The teeth-straightening firm’s fiscal 2020 sales are projected to slip 19% below its strong 2019. Yet its fiscal 2021 revenue is projected to climb 56% higher to reach $943.63 million. At the bottom end, its adjusted losses are still projected to shrink significantly in FY20 and FY21. SDC, which is a Zacks Rank #3 (Hold) right now, might be worth taking a small chance on as a broader bet on the future of healthcare.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
CVS Health Corporation (CVS) : Free Stock Analysis Report
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
Tencent Holding Ltd. (TCEHY) : Free Stock Analysis Report
Walgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report
Mitek Systems, Inc. (MITK) : Free Stock Analysis Report
Glu Mobile Inc. (GLUU) : Free Stock Analysis Report
Teladoc Health, Inc. (TDOC) : Free Stock Analysis Report
SmileDirectClub, Inc. (SDC) : Free Stock Analysis Report
DouYu International Holdings Limited Sponsored ADR (DOYU) : Free Stock Analysis Report
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