Stocks dropped Thursday, with all three major indexes down over 3.5% through morning trading. The move follows reports of upticks in coronavirus cases in the U.S. But the dip could simply mean more investors are taking home profits after a recent rally saw the S&P 500 climb into positive territory on the year and the tech-heavy Nasdaq hit new record highs.
Despite the recent declines, the S&P 500 is still up roughly 40% since the market’s March 23 lows. On top of that, May’s better-than-expected jobs data helped showcase that the economy is starting to recover as the pandemic lockdowns are lifted.
Meanwhile, the Fed on Wednesday indicated that interest rates could remain near zero through 2022. And economists said in a new Wall Street Journal survey that the U.S. economy will likely be in recovery by the third quarter, while also highlighting lower expected unemployment by the end of 2020.
Given this backdrop, stocks could continue to climb despite some near-term and intermittent volatility. As always though, investors should be on the hunt for stocks with fundamentals that are attractive to them. Today we dive into three “cheap” stocks trading under $10 a share that are part of the broader technology space because tech is poised to continue to drive the market for years to come…
Limelight Networks, Inc. LLNW
Prior Close: $5.27 USD
Limelight provides digital content delivery, video, cloud security, and edge computing services. The Scottsdale, Arizona-based firm allows its customers to deliver streaming video and other digital content to “any device, anywhere.” Limelight’s offerings are geared toward industries from media and broadcasting to gaming and more. This makes it not only an attractive stay-at-home play, but also a solid longer-term bet on the future of streaming that the biggest companies in the world have bet on, from Apple AAPL to Disney DIS.
LLNW posted stronger-than-expected Q1 earnings in late April, with revenue up 32% to help it post a new first quarter record. CEO Robert Lento said in prepared remarks that the firm was carrying momentum into Q2, “primarily driven by the increase of video-on-demand.”
Our current Zacks estimates call for Limelight’s Q2 revenue to jump 24%, with its FY20 sales projected to climb over 16% to crushed last year’s roughly 3% top-line expansion. Plus, Limelight is expected to soar from an adjusted loss of -$0.02 in FY19 to +$0.06 a share in FY20, while its bottom-line is projected to soar another 92% higher to $0.12 per share in FY21.
LLNW, which is a Zacks Rank #3 (Hold) at the moment, has seen its FY21 earnings consensus pop recently. Limelight also sports an “A” grade for Growth in our Style Scores system. LLNW shares have surged nearly 90% in the last year and currently rests below their 52-week highs. The stock also trades at 2.6X forward 12-month sales, which marks a discount against its industry’s 7.3X average and its own year-long high of 3.5X.
DouYu International DOYU
Prior Close: $8.91 USD
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 pop 30% since it posted if first quarter financial results on May 26.
DouYu’s positive earnings revisions help it earn a Zacks Rank #1 (Strong Buy) right now. DouYu’s FY20 revenue is projected to climb over 29%, with FY21 expected to jump another 23% higher to hit $1.66 billion. And its adjusted FY20 EPS figure is projected to skyrocket 200% to $0.51 a share, with FY21 set to come in at $0.68.
Despite its post-earnings run, DouYu sits over 20% below the highs it hit on its market debut in July 2019. Like LLNW, DOYU trades at a discount against its industry, which includes Glu Mobile GLUU and Activision Blizzard ATVI, and its own highs at 1.9X forward 12-month sales.
Mitek Systems, Inc. MITK
Prior Close: $10.00 USD
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%
Looking ahead, the San Diego-based company’s adjusted 2020 earnings are projected to jump 19% to $0.50 per share on 13% higher revenues. Mitek’s sales and earnings are both expected to climb another 17% higher in 2021. MITK is currently a Zacks Rank #2 (Buy) that rocks an “A” grade for Growth in our Style Scores system and is part of industry that rests in the top 2% of our more than 250 Zacks industries.
Mitek stock has climbed 70% since mid-March and is now up 25% in 2020. And the stock is trading 15% off its 52-week highs. MITK is also trading well below its one-year highs in terms forward sales at 3.8X vs. 4.7X. In the end, Mitek could continue to grow within our online and mobile-heavy economy.
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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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Limelight Networks, Inc. (LLNW) : Free Stock Analysis Report
Tencent Holding Ltd. (TCEHY) : Free Stock Analysis Report
Mitek Systems, Inc. (MITK) : Free Stock Analysis Report
Glu Mobile Inc. (GLUU) : Free Stock Analysis Report
DouYu International Holdings Limited Sponsored ADR (DOYU) : Free Stock Analysis Report
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