Big gains can come from stocks with small share prices, but the catalysts have to be there. A lot of speculators will lose their shirts chasing penny stocks without doing any research, but there are some bargains to be had among stocks with single-digit price tags.
Limelight Networks (EGIO -1.07%), Sirius XM Holdings (SIRI -1.21%), and Zynga (ZNGA) are some of the stocks trading below $10 that I see breaking out in the year ahead. Let's take a closer look at these three low-priced stocks with serious upside.
Limelight Networks hasn't lived up to its name over most of the past decade. You have to go back to 2011 to find the last year the content delivery network specialist posted double-digit revenue growth. However, things are finally starting to come together for Limelight Networks this year.
Edge computing is all about speeding up the delivery of content, and with Limelight Networks playing a starring role in streaming video, we're finally seeing the growth that long-suffering investors in the stock have been waiting for. Revenue has now topped 28% for three consecutive quarters, making it all but certain to finally break into the double digits on the top line for the first time in nine years.
This isn't just a top-line growth story. Limelight's bottom line is also improving, and come next year it could be the first time that it generates an annual operating profit since 2006 if momentum remains positive.
Sirius XM Holdings
As Limelight Networks celebrates the end of a losing streak, we're about to see the end of a winning streak at Sirius XM Holdings. The satellite radio pioneer's stock has strung together 11 consecutive years of dividend-adjusted gains -- a rare feat for any company, but particularly for a stock still trading in the single digits. The key is that the shares traded as low as a nickel in early 2009, when it was on the brink of bankruptcy.
Sirius XM stock is trading nearly 25% lower in 2020, and that's not entirely a surprise. The lifeblood of satellite radio is the car, and with new car sales slipping before the pandemic and folks not driving as much now, it makes sense for a premium radio service to take a hit.
The climate will get kinder next year. The commutes will pick back up in earnest, and ideally the recession starts to fade so that consumers have more money to pay for premium radio. An improving climate for radio advertising should also help get Sirius XM back on track after the stock's first down year in more than a decade.
We're the golden age of mobile gaming, and Zynga is ready to take advantage of the trend that it helped put on the map a decade ago, when FarmVille, Mafia Wars, and eventually Words With Friends were all the rave. Words With Friends is still a needle mover for Zynga, joining newer properties including Empires & Puzzles and Merge Dragons! to deliver heady growth.
Revenue soared 47% in Zynga's latest quarter, with bookings up a hearty 38% since the prior year's second quarter. Like Limelight Networks this isn't just a top-line growth story. Beyond the record revenue and bookings Zynga just posted its best operating cash flow in more than eight years.
Zynga is already sporting strong organic growth, but this summer it gobbled up Turkish developer Peak Games to kick its growth and portfolio up a notch. We're not putting our phones down anytime soon, and Zynga has excelled at the art of ramping up well-received titles while quickly moving on from the less inspiring releases. Zynga gets it. The stock briefly poked its head into the double digits this summer, something Zynga had not managed to do in more than eight years. It has pulled back in recent weeks, giving outsiders a chance to get in before the stock resumes its upward ascent.