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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| March 11, 2019
Cheap stocks – those that trade for a small nominal dollar amount, say, less than $10 – are a double-edged sword. And those blades can be even sharper in the case of tech stocks.
On the one hand, while the actual dollar price of a stock typically doesn’t tell you much about it (a $50 stock can be every bit as secure as a $500 stock), at a certain point, stock price does matter. Some institutional buyers (such as mutual funds) will avoid stocks under $10, and even more will give the cold shoulder under $5. Under the $1 mark, exchanges such as the New York Stock Exchange and Nasdaq likely will threaten to delist the stocks. That’s because typically, at those prices, stocks are trying to tell you something – and it’s often not a positive message.
The flip side? Institutional buyers can inflate stock valuations, so a lack thereof can keep them undervalued. The same goes for Wall Street analysts – typically, sub-$10 stocks may only have a few pros paying attention, further lowering the likelihood that these shares are overcrowded.
Here are 10 cheap tech stocks to buy that all trade for less than $10. Importantly, they all show significant growth potential, and according to TipRanks’ data covering the past few months, they all boast a “Moderate Buy” or “Strong Buy” consensus rating from the few Street analysts still covering the stocks. Just remember: Cheap stocks often are cheap for a reason; all of these carry considerable risk. Only approach these plays with funds from the speculative portion of your portfolio.
Data is as of March 10.
Market value: $243.6 million
TipRanks consensus price target: $4.04 (30% upside potential)
TipRanks consensus rating: Strong Buy
Mobile app advertising platform Digital Turbine (APPS, $3.10) is enjoying strong momentum right now thanks to its recent release of stellar earnings results for the December quarter.
Revenue came in at $30.4 million, up from $22.7 million in the previous quarter, and the company recorded EBITDA from continuing operations of $3.8 million (it earned roughly zero in the year-ago period). Gross margins soared for the third quarter in a row.
“We believe that Digital Turbine’s results over the past few years and focus on the core product and new products has positioned the company with some of the best fundamentals in the technology sector,” writes National Securities analyst Ilya Grozovsky.
As a result of the earning results, and a positive 2019 outlook, the analyst ramped up his calendar-year 2019 revenue and adjusted EBITDA estimates to $121 million and $11 million, respectively, from $116 million and $8 million.
Grozovsky also reiterated his “Buy” rating and boosted his price target from $3.50 to $4.15 – 34% upside from current prices. For more information on Digital Turbine’s shares, get a free APPS Research Report from TipRanks.
Market value: $179.8 million
TipRanks consensus price target: $9.38 (54% upside potential)
Adesto Technologies (IOTS, $6.11) is a leading developer of semiconductors including non-volatile memory solutions, application-specific integrated circuits and intellectual property cores.
Four analysts are currently covering IOTS, and all four have “Buy” ratings on the stock. One of these pros is Canaccord Genuity’s Michael Walkley. This five-star analyst recently reiterated his bullish call on the stock with a $9 price target (47% upside potential).
“Our positive investment thesis is based on our expectation that strong (Internet of Things) endpoint growth over the next several years will require low-power and long-battery-life solutions that should benefit Adesto’s portfolio and its differentiated memory solutions,” he writes. “We believe new products including MavriqCM and EcoXiP address new large market opportunities and even modest share gains could result in upside versus our estimates and consensus.”
Walkley thinks this will drive strong revenue growth and generate significant operating leverage. He now believes the company will go from a non-GAAP net loss in 2018 to a 43-cent-per-share profit in 2020. He concludes, “We believe Adesto is uniquely positioned with its products to generate strong long-term earnings growth.”
For further insights on this tech stock, turn to TipRanks’ IOTS Research Report.
Market value: $526.7 million
TipRanks consensus price target: $4.50 (23% upside potential)
TipRanks consensus rating: Moderate Buy
Castlight Health (CSLT, $3.67) is a cloud-based software provider that focuses on health benefits management. Its Complete app makes it easy for employees to use their benefits and provides tailored health recommendations all on one single platform.
“After launching Castlight Complete, which was one of the key milestones for 2018, management remains confident it can overcome churn and the loss of Walmart,” writes five-star Cantor Fitzgerald analyst Steven Halper. Walmart (WMT) revealed that it wouldn’t be migrating to the new Complete platform back in August 2018, costing the company $13 million.
However even without Walmart, Halper sees Complete as a “new chapter” for the company and a “major driver of longer-term growth.” Management remains optimistic about Complete and has indicated that four of its top five customers will be on the platform. “Complete, which is now live with 300,000 users, is important for 2019 performance,” Halper writes.
The risk-reward tradeoff looks attractive at these levels. Halper is modeling another 36% upside from current share prices with his target of $5. Find out what other analysts think of this healthcare tech stock in TipRanks’ CSLT Research Report.
Market value: $4.7 billion
TipRanks consensus price target: $5.35 (4% upside potential)
Social game developer Zynga (ZNGA, $5.12) is the name behind long-ago hits such as FarmVille and Words With Friends. Although the company faced a few hard years following its split with Facebook (FB) and its inability to come up with titles to rival its older blockbusters, it is now recovering thanks to savvy acquisitions and a renewed focus on core “forever franchises.” CEO Frank Gibeau – a former Electronic Arts (EA) exec – recently went so far as to say that the company’s “turnaround is now complete.”
The numbers are starting to show it. Zynga reported record mobile online game revenues and bookings, as well as record mobile advertising revenues and bookings, in its recently reported Q4.
Wedbush analyst Michael Pachter recently wrote a report titled “Positive Momentum to Continue in 2019, with New Releases the Icing on the Cake,” which is a less-than-subtle indication of which way he’s leaning on ZNGA. The analyst, who has a $6.40 price target (25% upside), reiterated his “Buy” rating, writing, “Zynga is a company without peer, generating over 3x the bookings of its closest publicly traded competitor, Glu Mobile (GLUU).”
The company expects bookings of $1.35 billion this year and “double digit” bookings growth in 2020 “implying bookings approaching $1.5 billion that year,” Pachter writes. Find out more from TipRanks in its ZNGA Research Report.
Market value: $101.4 million
TipRanks consensus price target: $1.92 (79% upside potential)
Sequans Communications (SQNS, $1.07) is a 4G chipmaker and leading provider of single-mode LTE chipset solutions. In an encouraging sign, several five-star analysts have recently signaled their support for this often-overlooked, and super-cheap, stock.
Top Needham analyst Rajvindra Gill believes growth can reaccelerate this year, principally driven by the company’s CAT 1 (voice-grade copper) cable business.
The analyst writes, “We expect growth to reaccelerate throughout CY19 principally driven by CAT 1 business (new projects with Gemalto), CAT 1 modules vis-a-vis Sprint (S) network, new projects in Japan and a rebound in broadband.”
The company also is enjoying industry support: “Sequans continues to expand design wins and partnerships, with currently over 75 design wins … representing $200 million in revenue over the next 3-5 years,” writes Baird’s Tristan Gerra.
He writes that a new strategic investor has agreed to invest $8.4 million to help accelerate Sequans’ 5G product roadmap. With these developments in mind, the analyst sees 87% upside potential for SQNS. Check out other analyst targets for Sequans in TipRanks’ SQNS Research Report.
Courtesy Everspin Technologies
Market value: $142.2 million
TipRanks consensus price target: $14.00 (68% upside potential)
Innovative semiconductor stock Everspin Technologies (MRAM, $8.32) has surged by an incredible 50% year-to-date. Shares exploded on news that semiconductor giant Intel (INTC) is endorsing the company’s MRAM (magnetic random access memory) technology.
MRAM memory is a rival to the more traditional DRAM memory – another type of random-access semiconductor memory. The notable advantage of MRAM is that it can retain its data even when power is switched off.
Intel will now integrate embedded MRAM into its 22nm FinFET CMOS technology. “We don’t know if Intel is using the Everspin’s technology but Intel’s decision certainly validates the MRAM technology, which has been the crux of the investment theme,” Needham’s Gill wrote on Feb. 20.
Gill believes major MCU suppliers “will eventually replace eFlash with MRAM as it has higher endurance and faster write cycles.”
“We believe over the next several years, nearly 50% of the 32-bit MCU market could transition to MRAM as they transition to smaller process nodes,” he writes. “All the major MCU suppliers are actively reviewing their current flash technology.”
Given this promising outlook, Gill is sticking with his “Buy” rating and $10 price target (20% upside potential) for now, but he sees shares hitting even higher down the road. “Ultimately, we see value for the shares to $14 PT, based on an EV/sales multiple of 3.3x our 2019 revenue estimate.” Find out more from TipRanks in its MRAM Research Report.
Market value: $407.8 million
TipRanks consensus price target: $8.00 (47% upside potential)
The Meet Group (MEET, $5.46) is motivated by “the universal need for human connection.” MEET operates mobile social entertainment applications that enable users to interact with new people around them, generating revenue through ad sales and subscriptions.
One of the stock’s big supporters is Roth Capital’s Darren Aftahi. He applauds the recent acquisition of German dating app Lovoo for $70 million, and writes: “Overall, in 2019, MEET continues to be a favorite name of ours and we remain buyers on what we feel is a strong outlook for further incremental video monetization on both Lovoo scale and the broader portfolio through new features.”
These new features include Battles – which allows for two livestreamers to compete in front of an audience – and should be positive catalysts for video monetization, Aftahi says. Moreover, MEET has announced another feature called Levels, rolling out in the first half of this year, which “gamifies” the platform by creating a ranking system and unlockable features for video users. The analyst thinks this is a sticky feature that will help drive engagement.
Aftahi reiterated his “Buy” rating with a $8 price target (47% upside potential). Bear in mind, shares have more than doubled over the past year. You can check out more analysis in TipRanks’ MEET Research Report.
Market value: $310.5 million
TipRanks consensus price target: $14 (64% upside potential)
Camtek (CAMT, $8.52) develops optical inspection systems for printed circuit boards. Helping the stock is a deal with Taiwan’s Chroma in which the equipment provider will pay $74.3 million for a 20.5% stake in the company.
Following the deal announcement, Camtek CEO Rafi Amit said, “Today we signed agreements of strategic importance for Camtek, whereby Camtek is gaining an important shareholder that will enable it to strengthen its presence in Asia in general, and in Taiwan in particular.”
The market certainly approves; shares are up 27% year-to-date. And Wall Street’s recent price-target ramps are another positive indicator that the company is moving in the right direction.
Five-star Northland Capital analyst Gus Richard has just boosted his price target from $15 to $16 (88% upside potential). Richard writes that CAMT continues to significantly outperform other capital equipment stocks, thanks to higher-speed memory interfaces, market-share gains and new products and applications.
B. Riley FBR’s Craig Ellis has recently lifted his price target, too, from $10.50 to $12 (41% upside), citing strong earnings and execution. Discover more about this lesser-known cheap stock in the TipRanks’ CAMT Research Report.
Market value: $329.0 million
TipRanks consensus price target: $4.50 (56% upside potential)
Limelight Networks (LLNW, $2.88) is a premier content delivery network (CDN) service provider that helps organizations deliver faster websites, more responsive applications, high-quality videos and consistent downloads to any device.
Five-star Oppenheimer analyst Timothy Horan recently met with the company’s CFO in Philadelphia. Following the meeting, he wrote, “Management believes it is moving past churn/pricing pressures that negatively impacted (the second half of 2018).” He thinks LLNW’s unique infrastructure “can provision (over-the-top) video gaming better than its peers.”
Limelight recently just signed a partnership with Ericsson (ERIC) that Horan deems a “game-changer.” The deal will double the company’s network capacity, and in doing so, should also drive a meaningful revenue bump come the second half of this year.
Horan says the stock is attractive at these levels, and if the company can hit a 15% revenue-growth goal, there is upside to his $4 price target (39% potential upside). For more information on Limelight’s shares, get the LLNW Research Report from TipRanks.
Market value: $179.5 million
TipRanks consensus price target: $9.35 (56% upside potential)
Akoustis Technologies (AKTS, $6.00) specializes in acoustic wave technology for mobile and wireless devices. Share prices have exploded by roughly 275% over the past three years, but the Street still sees significant upside potential looking forward.
Five-star Oppenheimer analyst Rick Schafer has just reiterated his “Outperform” rating (equivalent of “Buy”) with a $10 price target for 67% upside potential. Note that Schafer is in the top 100 of all tracked analysts for his stock picking abilities.
“Early engagement and order traction from OEMs in diverse end markets, including LTE infrastructure, defense and CBRS, are indications of Akoustis’s steady progression toward revenue ramp,” Schafer writes.
Following fiscal second-quarter results, Schafer told investors, “We see revenues accelerating as customer production orders transition to revenues.” He notes that management continues to execute on key milestones, including expanding Wi-Fi and network infrastructure share.
Keep your eye out for groundbreaking developments, too. “The company is also sampling industry’s first 5.6GHz WiFi filter, paving the way for a tandem BAW solution and opening the door to a full tri-band solution,” Schafer writes. Find out more from TipRanks in its AKTS Research Report.
Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.