They say the bigger they are, the harder they fall -- but is the inverse true for low-priced stocks? The smaller they are the faster they rise? Things are never that easy. Stocks with single-digit price tags are there for a reason, and most of them never bounce back. Let's take a look at some of these names that are positioned to win in 2020.
Zynga (ZNGA), TrueCar (TRUE 1.47%), and Qutoutiao (QTT) are three names to watch that are trading in the single digits. They are risky, of course, but let's go over why these are some of the great stocks that can be had for less than $10 a share.
We're spending more time on our smartphones, and that's good news for publishers of mobile games that have a firm grasp of what casual players crave in their diversions. Zynga is the company behind Words With Friends, Empires & Puzzles, and other sticky mobile apps.
There was a time when Zynga was leaning on display ads to propel its business, but these days it's all about the more promising user-generated revenue. More than 80% of its revenue and bookings are now stemming from user payments, and that's a good thing since that segment saw its bookings soar 80% in its latest quarter. Ad revenue, which now accounts for less than a fifth of the business, grew at a much slower 12% clip.
It all adds up to a hearty 63% surge in revenue -- and an equally impressive 62% pop in bookings. Zynga's guidance calls for revenue to decelerate to 21% growth in 2020, but Zynga has a history of putting out conservative outlooks. Not every stock with a single-digit price tag is out of favor. Despite being a low-priced stock, Zynga hit a seven-year high on Thursday.
Zynga may have hit a multiyear high last week, but it was another story for TrueCar. Shares of the online provider of leads for showroom operators hit fresh all-time lows on Friday after announcing that it had lost a major partner. The online car-shopping service revealed that USAA Federal Savings Bank -- a longtime partner accounting for 29% of TrueCar's clientele -- will end the partnership by the end of the third quarter.
Losing a major contributor is never a good look, but TrueCar hopes to make up for the breakup with USAA by finding new partners. TrueCar makes the cut in this list because it was actually already on the comeback trail before this unwelcome news. TrueCar has exceeded its own guidance in back-to-back quarters, and it had even raised its outlook three months ago.
Investors seem to have started to check their pessimism during Friday's sell-off, and while the stock did end the trading session with an 11% hit, it closed out the day bouncing 34% off its intraday low. Losing one lead source isn't the end of TrueCar, no matter how important USAA has been to this 13-year partnership.
If Zynga isn't enough proof that a company with a share price in the single digits can post beefy top-line gains, I offer up Qutoutiao as another example. The operator of mobile content platforms in China is another speedster, growing its revenue by 44% in the third quarter of last year. It should announce its fourth-quarter results early next month.
Qutoutiao's reach is as wide as its share price is small, encompassing 133.9 million monthly active users at the end of September. Engagement is strong, with the average user spending 61.3 minutes a day on Qutoutiao. There are currently near-term challenges to monetizing an online platform in China given the country's dicey economy, but it's hard to deny the long-term appeal of investing in China, the world's most populous nation.