December 5, 2020

3 Cheap Tech Stocks Under $10 to Buy Despite Volatility Fears

The S&P 500 has climbed 4% since September 23 to help claw back some of its early September losses. Wall Street has turned its attention to the election, which is only four weeks away and might have become more complicated by President Trump’s Covid-19 diagnosis.  

Along with the election, investors are navigating how to price in what might be next on the coronavirus front. It is worth pondering how much political will there would be for another broad-based lockdown, as large areas of the economy still struggle to return to anything close to normal.

This prompted Fed Chairman Jerome Powell to double down on his push for Congress and the White House to provide more economic stimulus. “The expansion is still far from complete. At this early stage I would argue that the risks of policy intervention are still asymmetric,” Powell said in prepared remarks Tuesday.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. The risks of overdoing it seem, for now, to be smaller.”

On top of that, it is always worth quickly looking back to see how far the market has come. The market posted its best two-quarter run (Q2 and Q3) since 2009 after the coronavirus ended the historic bull run in March.

The S&P 500 is still up over 50% off its lows and roughly 6% in 2020. The proxy index for the broader market is once again back up above its 50-day moving average, after technical traders worried a few weeks ago about a big slip down to the 200-day.

The overall climb comes as the economy continues to add more jobs, even if things slowed down in September. The U.S. unemployment rate fell to 7.9% last month, with 11.4 million jobs added since the major layoffs in March and April. Plus, the S&P 500 earnings outlook continues to improve for the third quarter and beyond, and Fed’s choice to keep its interest rate near zero through at least 2023 should help support stocks.

Clearly, many investors might want to remain on the sidelines for now, or simply not make any new additions until some of the bigger questions are answered. But those with longer-term horizons can get hurt trying to time the market.

So let’s jump into three companies within a niche area of the market: tech stocks trading for under $10 per share…

iClick Interactive Asia Group Limited ICLK

Prior Close: $6.79 USD

IClick Interactive provides online marketing and enterprise data solutions. ICLK works with global brands to help provide exposure in the expanding Chinese market, where it claims it’s able to reach “98% of China Internet users.” The firm, which boasts that it connects “marketers worldwide to the right audience in China and beyond,” was founded in 2009 in Hong Kong and was listed on the Nasdaq in late 2017.

The company topped our bottom-line estimates in the trailing two periods, with sales up 25% in Q1 and 18% in Q2 FY20, which it reported near the end of August. ICLK’s performance helped send its stock price to new highs in early September. Shares of iClick are up 110% in 2020 to crush its industry’s 5% decline and have popped 125% in the last 12 months. This climb includes its recent downturn.

The stock rests nearly 30% below its recent highs, including Tuesday’s jump, which might set up a stronger buying opportunity for those high on ICLK. It’s worth noting that iClick issued 8.5 million ADS shares in an early September follow-on offering to help fund investments in its growing enterprise solutions segment and more.

Zacks estimates call for iClick’s Q3 revenue to jump 26%, with its fiscal 2020 sales projected to surge over 27% to $254 million to top FY19’s 25% expansion. Meanwhile, the online marketing and enterprise data solutions firm is expected to swing from an adjusted loss of -$0.04 a share last year to +$0.03 in FY20 and then climb to +$0.09 in FY21. ICLK’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now.

The stock also earns a “B” grade for Growth in our Style Scores system and all four brokerage recommendations that Zacks has accumulated for the stock come in at a “Strong Buy.” And iClick announced on Tuesday a “strategic collaboration” with Tencent International Business Group on “Smart Solutions in Key APAC Markets,” which helped ICLK shares climb.

Limelight Networks, Inc. LLNW

Prior Close: $5.50 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,” and its offerings are geared toward industries from media and broadcasting to gaming. LLNW topped our Q2 estimates, with sales up 28%, while it swung from an adjusted loss to +$0.03 per share.

Limelight’s solid quarter helped it lift its full-year sales guidance. Zacks estimates call for its Q3 sales to jump roughly 15%. Peeking ahead, its FY20 revenue is projected to climb 18.1%, with FY21 expected to come in another 10% higher. The company is also expected to soar from an adjusted loss of -$0.02 in FY19 to +$0.08 a share in FY20, with FY21 expected to climb to $0.12.

Limelight is currently a Zacks Rank #2 (Buy) that holds an “A” grade for Momentum. LLNW is up 100% over the last 12 months, yet it rests nearly 30% off its early July highs. Luckily, the stock has started to bounce back, up 15% in the past month. And investors won’t have to wait long for company updates, with LLNW set to release its Q3 results on October 22.

Sirius XM Holdings Inc. SIRI

Prior Close: $5.61 USD

Sirius XM is a subscription satellite radio giant that expanded its reach through its early 2019 acquisition of Pandora. This helped boost its audio and music streaming presence as it competes against the likes of Spotify SPOT, Apple AAPL Music, and others. The firm now reaches over 100 million people every month. SIRI matched our Q2 earnings estimate at the end of July, even though its ad business has taken a coronavirus-based hit as advertisers pull back on spending everywhere. Sirius also added more users than projected.

Shares of SIRI are up 20% off the market’s lows, yet they remain 25% below their pre-COVID highs. This could give it some runway. Sirius is up 45% in the last five years, but the last two years have been tough. Luckily, its 0.94% dividend yield, which beats the 10-year U.S. Treasury note’s 0.73%, helps provide investors with some income. Plus, the board in mid-July announced the approval of an additional $2 billion in buybacks. And Sirius announced in July that it is set to storm into the booming podcasting market with its purchase of Stitcher from E.W. Scripps Co. SSP.

Zacks estimates call for SIRI’s fiscal 2020 sales to slip 0.48%, with FY21 projected to jump 5.5% higher to $8.18 billion. Meanwhile, its adjusted earnings are projected to climb 20% and 18% over this same stretch. And it has seen its earnings outlook improve recently to help SIRI earn a Zacks Rank #2 (Buy) heading into its Q3 financial release on Oct. 22.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
Sirius XM Holdings Inc. (SIRI) : Free Stock Analysis Report
 
Limelight Networks, Inc. (LLNW) : Free Stock Analysis Report
 
E.W. Scripps Company The (SSP) : Free Stock Analysis Report
 
iClick Interactive Asia Group Ltd. (ICLK) : Free Stock Analysis Report
 
Spotify Technology SA (SPOT) : Free Stock Analysis Report
 
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