5 Cheap Stocks to Buy for $10 or Less
Cheap stocks are flush with risk and aren't for the faint of heart. But these five names offer compelling bull cases for those willing to stomach uncertainty and volatility.
Cheap stocks are effectively Wall Street's casino. It's OK to play them for fun once in a while – just don't make a habit of it.
Stocks come in all shapes, sizes and prices. Right now, some of the largest companies on earth include Amazon.com (AMZN) and Google parent Alphabet (GOOGL), both of which trade at four-figure prices. While nominal prices broadly don't mean much – a company with a $50 stock might be every bit as solid as a company with a $250 stock – these firms' outsize stock prices (and more importantly, their roughly trillion-dollar market values) reflect a long track record of success, not to mention extremely stable financial positions.
On the other end of the spectrum are small caps and even micro-caps: typically cheap stocks that trade for such low prices for a reason.
Investors often gravitate toward cheap stocks in part because of the psychological appeal of being able to buy many shares for a small dollar cost. Also, these stocks are often subject to bigger price swings, making it seemingly easier to reap big gains in a short time.
But institutional investors often do the opposite. Sometimes they bow out once a stock dips below $10, and more will exit once share prices dive below $5. That's because while nominal prices typically don't matter, when they're low enough, they reflect higher risk. Some stocks trading in single digits are in long-term decline. Very low stock prices often reflect smaller market values, and lower-value companies are more susceptible to "pump and dump" schemes. Also, the major exchanges have a $1-per-share minimum trading threshold – stocks that trade under this for long enough risk being delisted.
Even good cheap stocks to buy carry significant risks, such as high debt loads or narrow revenue streams.
Here, we've identified five cheap stocks to buy for their promising potential. In each case, they've caught the eye of at least one or two analysts; like institutional investors, Wall Street's analyst community often turns away from sub-$10 stocks. Just remember: These are extremely risky positions that can move in a hurry. If you invest in these at all, do so in small amounts that you can afford to lose. Also, use limit orders and stop-losses when speculating in cheap stocks, and monitor their prices carefully.
Data is as of June 29.
LiveXLive Media
- Market value: $195.6 million
Since the start of the pandemic, one thing many people have grown to miss is live music – everything from concerts to club performances to dance-hall shows.
Fortunately, LiveXLive Media (LIVX, $3.28) doesn't rely exclusively on in-person events – and it shows given a more-than-doubling of shares despite most such performances being shut down. The digital media company, which acquires, distributes and monetizes live music, can do the same thing with internet radio, streaming music and video content.
That market has been a promising one as people head online to entertain themselves. LiveXLive says it has sold more than 17,000 pay-per-view tickets in 96 countries since announcing PPV and digital touring in May, averaging $27 a pop. And this week, LIVX said its international pay-per-view event with K-pop (Korean pop) artist Monsta X sold out of all $150 VIP packages in two minutes as part of an event to be streamed on July 25.
Its most recent event – a livestream involving retired NBA superstar Shaquille O'Neal and Tampa Bay Buccaneers tight end Rob Gronkowski – received more than 9 million views. That has driven LiveXLive's total livestream views to more than 78 million this year. The company also announced on June 29 that paid subscribers had reached a record 873,000.
Earlier in June, the company announced record full-year fiscal 2020 revenues of $38.7 million, up from $33.7 million a year ago.
The thing to watch for here, however, is that while the company's revenues are growing rapidly, its losses are piling up quickly, too. LiveXLive hasn't turned an annual profit since coming public in late 2017, and they've grown each year since then.
Nonetheless, Alliance Global Partners' Brian Kinstlinger has LIVX among his cheap stocks to buy. The analyst raised his price target in June from $5.50 per share to $6, citing a "rich portfolio" of live events, stream-from-home, podcasts and PPV events. He also sees the company's new direct sales force driving better monetization. Ladenberg analyst Jon Hickman also raised his price target, from $4.50 to $5.75, citing the company's increasing subscriber growth. In fact, over the past three months, LIVX has received nothing but Buy calls from the six analysts who have sounded off on the stock.
Evoke Pharma
- Market value: $86.0 million
No list of cheap stocks to buy would be complete without a pharmaceutical/biotech name or two, which typically have enormous quick-movement potential on the strength (or weakness) of trial data.
Evoke Pharma (EVOK, $3.48) is one such name. The stock has more than doubled in 2020, in large part on excitement for its Gimoti nasal spray, which recently received approval from the U.S. Food and Drug Administration.
Gimoti, which goes under the generic name metoclopramide, is unique because it's the only nasally administrated product that has approval to treat gastroparesis, a condition that prevents the stomach from contracting and interferes with digestion. Other such drugs are administered orally. However, Evoke believes its treatment will be more effective because it bypasses the GI system and directly enters the bloodstream.
"Many times, patients do not experience adequate relief of their gastroparesis symptoms from current treatments, representing a significant need for a new approach to therapy," Evoke CEO Dave Gonyer said in a release.
The approval allows Evoke to access a $5 million credit line to help fund manufacturing and commercialization. The good news is that unlike many smaller biotechs that are saddled with high debt, EVOK is sitting on $4.1 million in cash against virtually no debt.
Like many cheap stocks, EVOK is thinly followed by the Wall Street crowd. However, H.C. Wainwright analyst Raghuram Selvaraju upgraded Evoke Pharma's shares from Neutral to Buy following the FDA approval and set a 12-month price target of $10 – almost triple current prices. Assuming a "modestly-paced trajectory" of $14 million in Gimoti sales in 2021, Evoke could be cash-flow breakeven by the first half of 2020, Selvaraju writes.
AIM ImmunoTech
- Market value: $83.5 million
As important as GI issues are, the medical community – and the stock market – is heavily focused on research related to treating, curing and preventing COVID-19.
AIM ImmunoTech (AIM, $2.56) is a Florida-based biotech company with an entry in the COVID-19 product pool: Ampligen (rintatolimod), which treats severely debilitated patients with chronic fatigue syndrome. The FDA in May authorized human trials to assess Ampligen's effectiveness, along with an interferon known as alfa-2b, in clearing the upper airway of cancer patients who have COVID-19.
AIM also has filed an application in the U.S. for Ampligen to treat chronic fatigue induced by COVID-19. Ampligen already has been approved in Argentina to treat myalgic encephalomyelitis/chronic fatigue syndrome; COVID-induced chronic fatigue shows similarities to ME/CFS.
"Worldwide, we may still be in early stages of the pandemic," AIM ImmunoTech CEO Thomas Equels said in a release. "As a result, we believe there exists a significant risk of SARS-CoV-2 induced chronic fatigue among the millions of survivors of COVID-19, as we have witnessed in the prior SARS-CoV-1 epidemic."
Like many health and pharmaceuticals fighting COVID-19, AIM ImmunoTech's shares have soared in 2020, from below 60 cents at the start of the year to well above $2 now.
AIM, which also is thinly covered, has received three Buy ratings from the three analysts who have sounded off about it in 2020. Most recently, Maxim analyst Jason McCarthy maintained a Buy target on shares in April and raised the price target from $2 per share to $5, saying the market capitalization of $75 million didn't yet capture the value of Ampligen's potential. While AIM has improved since then, shares are still well below his PT.
iBio
- Market value: $294.7 million
Next on our list of cheap stocks to buy is iBio (IBIO, $2.46) – another coronavirus play.
Shares spiked from a quarter per share to start the year to nearly $2.46 in late February. While prices receded during the broader market downturn, they recently shot back up again near their 2020 highs. All told, the stock has nearly tripled over the past 52 weeks, albeit in an extremely rocky fashion.
So why this on-again, off-again enthusiasm for IBIO stock?
It comes down to iBio's "FastPharming" technology. The company believes its unique plant-based protein production system will allow whoever has a vaccine to scale production quickly – and that's essential for combating a global pandemic. The firm says it can create 500 million doses of a COVID-19 vaccine annually from its Texas facility; iBio currently has two vaccine programs in preclinical studies now.
Last week, Alliance Global Partners initiated covered of IBIO stock with a Buy rating and a price target of $2.75. Analyst Ben Haynor said the company's transition to becoming a specialized contract development and manufacturing organization (CDMO) makes it "well-positioned to be part of the coronavirus solution."
Note, however, that iBio does have an unenviable net debt position (debt minus cash) of $23.5 million, according to S&P Capital IQ data. Moreover, the company has been generating steeper net losses for years, including $17.6 million of red ink for its fiscal year ended June 2019.
Envela
- Market Value: $158.9 million
Many cheap stocks belong to companies that are on the younger side, but Envela (ELA, $5.90) – which buys and sells luxury goods such as diamonds, watches and even bullion – has been around since 1965. The company's customers include everyone from individual consumers and retailers to recycling and IT asset disposition firms.
Envela isn't exactly a "feel-good" organization in that it's best-positioned for success if the U.S. is headed down the path of an extended recession. That's not necessarily a bad bet to make right now, either.
Unemployment remains in double digits, and federal stimulus payments and mortgage and rent forgiveness programs are set to expire soon. The Federal Reserve has indicated that it's prepared to keep interest rates near zero through at least 2022 – a signal that the nation's leading economists are digging in for a long downturn, too. Gold prices have jumped by about 18% to nearly $1,800 per ounce, too, which benefits Envela's operations.
Indeed, for the March quarter, Envela reported a 61.2% year-over-year jump in revenues, and profits shot to 4 cents per share from a penny per share in the year-ago quarter. "Our business got off to a strong start in 2020, resulting in one of the biggest quarters in Envela's history: CEO John Loftus said in the quarterly earnings release.
Just be careful, and perhaps wait for a volatility-induced pullback before trying to ride ELA higher. The stock has already surpassed its most recent analyst price target. In May, Argus Research's Steve Silver said the stock was a compelling value despite more than doubling its share price. But his new PT was $5, which the company eclipsed this week.
Nonetheless, Envela could continue to reap profits if the economic recovery stalls and gold prices continue to climb.
