When it comes to low-priced stocks, maybe it's best to curb your derision. There are a lot of investments out there with single-digit price tags, and they're not all speculative fodder for penny-stock gamblers to fight over. Stocks trading below $10 are naturally riskier than some of the more established choices out there, but there are also opportunities for the taking if you're a risk-tolerant investor.
Zoe's Kitchen (ZOES), Sogou (SOGO), and Glu Mobile (GLUU) are three names currently trading on the wrong side of $10, but their prospects are brighter than their sticker prices. Let's go over why they may be among the top stocks under $10.
Image source: Zoe's Kitchen.
1. Zoe's Kitchen
Some names fall out of the sky to land into this pool of single digits, and on Friday, that was Zoe's Kitchen. The fast-casual chain specializing in Mediterranean delicacies fell below $10 for the first time in its four years as a public company after posting fresh financials after Thursday's market close.
The quarter was pretty bad. Revenue rose 13%, but that was solely the handiwork of new restaurants opening. Comparable restaurant sales actually declined 2.3%. Margins contracted, and Zoe's stunned investors by posting a loss. It also hosed down its full-year guidance, a putrid cherry on top of this melted sundae.
It's not a good look. Its guidance calls for negative comps for all of 2018, so it's not as if the turnaround will materialize anytime soon. However, Zoe's Kitchen's unique concept makes this a name worth bottom-fishing for at this point. There are now 258 mostly company-owned locations, and the stock is now too cheap to ignore despite the near-term operating challenges.
2. Sogou
Investors worldwide know who China's leading search engine is, but the next most popular platform -- based on the volume of mobile queries according to industry watcher iResearch -- isn't a household name outside of China. Most stateside investors probably don't even know that Sogou trades publicly, but it does since it was spun off at $13 late last year.
Though Sogou is now a broken IPO, it's growing quickly. Revenue rose 53% in the first quarter, its first full period as a public company. Adjusted earnings climbed 56%. The stock has been trading in the single digits for three months now. However, that won't be the case if it keeps stringing together a few more quarters of better-than-expected financial results.
3. Glu Mobile
I've singled out Glu Mobile as a top stock under $5 in past columns, but the stock's strong appreciation has graduated the mobile gaming darling into this list instead. Glu Mobile has been consistently trading above $5 since posting blowout quarterly results earlier this month. It's been nearly three years since it was trading above the $5 mark.
Bookings rose 25% in its latest quarter, fueled mostly by the continuing success of its interior decorator game Design Home. However, even a blast from the past -- Kim Kardashian: Hollywood -- has come through with sequential improvement in revenue and engagement.
Glu Mobile has an impressive pipeline of games on the way, and it also boosted its full-year guidance earlier this month. Mobile gamers may be fickle, but Glu Mobile has a knack for keeping its fingers on the pulse of the app gaming realm.
