Stocks fell in morning trading to close the week as coronavirus cases spike in parts of the U.S., including California and Texas. The numbers and the headlines have continued to increase over the last several weeks as economies around the world reopen from their pandemic lockdowns.
Wall Street has, for the most part, looked ahead to the eventual recovery for months, and some of the numbers indicate that the economy is headed in the right direction. But Texas Gov. Greg Abbott announced Friday that the state is rolling back some reopening plans. Earlier in the week, Disney (DIS) postponed the reopening of its California amusement park and Apple (AAPL) said it would shut down more stores in the Houston area.
Fears of a second lockdown might remain. However, it’s unclear if there would be the political will to even attempt that unless things get far worse. Let’s also not forget that the Nasdaq hit new highs earlier this week on the back of gains from the likes of Amazon (AMZN) , and the S&P 500 is still up roughly 37% from its March lows. Wall Street is also likely to remain in ‘don’t fight the Fed’ mode.
Investors must remain vigilant and the coronavirus remains a real concern. That said, there are still opportunities in the market. So today we dive into three ‘cheap’ stocks trading under $20 a share that investors might want to buy despite concerns about spikes in coronavirus cases…
Yext (YEXT)
Prior Close: $16.93 USD
Yext and its “Search Experience Cloud” aim to help organizations maintain an accurate digital footprint and consistently provide their consumers with the most up-to-date and accurate information about their businesses. The goal is to ensure people find the correct info across various search engines, virtual assistants like Siri, and elsewhere. Yext, which went public in 2017, has amassed some big-name clients such as Marriott (MAR) , Taco Bell (YUM) , and others, and its business model appears valuable in our digital economy that’s flooded with information.
The company’s fiscal 2020 revenue climbed 31% to $300 million, which topped FY19’s 34% expansion. More recently, its Q1 FY21 sales jumped 24%, with its customer count up 36% to roughly 2,100. On top of that, Yext announced a partnership with Adobe (ADBE) at the end of May with will enable “every Adobe rep in the world” to “refer Yext Answers to their customers…”
Yext shares have surged 90% since early April to crush its industry’s 27% climb. The stock is now up over 17% in 2020, but it still sits 25% below its 52-week highs and roughly 30% off its summer 2018 records, which might give Yext room to run. Our Zacks estimates call for Yext’s FY21 revenue to climb 18.3%, with FY22 projected to come in 21% higher. Meanwhile, its adjusted loss is expected to shrink by $0.04 this year to -$0.44 and then be cut to -$0.30 in FY22. Yext’s positive earnings revisions help it earn a Zacks Rank #1 (Strong Buy) right now.
DouYu International (DOYU)
Prior Close: $11.10 USD
DouYu is a live streaming firm focused on the gaming and e-sports market in China. The company’s offerings operate across both PC and mobile apps and it boasts that it “has gained coveted access to a wide variety of premium eSports content.” DOYU went public in July 2019 and investors can loosely think of its as the Chinese Twitch for its ability to allow people to watch video games live. The company is backed by Chinese social media and gaming powerhouse Tencent (TCEHY) and it competes against fellow U.S.-listed HUYA Inc. Sponsored ADR (HUYA) within the growing market.
DouYu outperformed the high-end of its Q1 FY20 sales guidance in late May, with revenue up 53%. Its mobile monthly average users climbed 15% to 56.6 million and its quarterly average paying user count popped 26% to 7.6 million. Plus, the company’s margins hit a record high. DouYu also topped our adjusted earnings estimate by 45%. And investors have found DouYu’s story compelling recently, with shares up over 80% since early April and 35% in 2020 to push it into the green as a public firm.
Despite its climb, DOYU trades at a discount against its industry that includes Activision Blizzard (ATVI) and Electronic Arts (EA) and its own highs. Peeking ahead, DouYu’s fiscal 2020 revenue is projected to climb 30.5%, with FY21 expected to jump another 23.4% higher to hit $1.68 billion. And its adjusted FY20 EPS figure is projected to skyrocket 200% to $0.51 a share, with FY21 set to jump all the way to $0.68 per share.
DouYu is a Zacks Rank #1 (Strong Buy) right now that investors might want to take a chance on as a low-price bet on the booming global video game market that is projected to soar from $159 billion this year to over $200 billion by 2023.
NeoPhotonics (NPTN)
Prior Close: $8.56 USD
NeoPhotonics designs and makes advanced hybrid photonic integrated circuit-based modules and subsystems utilized in high-speed communications networks across telecom and datacenters. The San Jose, California-based firm topped our Q1 fiscal 2020 estimates in late April, with revenue up 23%. NeoPhotonics has seen its earnings revisions climb since it reported to help it capture its Zacks Rank #2 (Buy) at the moment.
NeoPhotonics is part of our Semiconductor – Communications industry that currently sits in the top 19% of our over 250 Zacks industries. Meanwhile, NeoPhotonics shares have soared 80% since mid-March and nearly 100% in the past 12 months. Investors should also note that NPTN has traded at over $15 a share in the past five years. The stock also sports a “B” grade for Value and an “A” for Growth in our Style Scores system. And NPTN trades at 0.9X forward 12-month sales, which marks a huge discount against its industry’s 6.5X average and its own 12-month high of 1.3X.
Looking ahead, NeoPhotonics is projected to see its Q2 sales jump 20%, to help it climb from an adjusted loss of -$0.03 a share in the year-ago period to +$0.12 per share. On top of that, its full-year revenue is projected to jump roughly 11.5% both this year and next, with its FY20 EPS figure expected to skyrocket from +0.01 to +$0.55 a share. NeoPhotonics earnings expansion is then expected to carry over into 2021, with it projected to climb to $0.64 a share.
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