The stock market generally makes you wealthy little by little over time; the S&P 500 averages a 10% annual return historically. Quickly doubling your money is something you might think is better done by playing blackjack, but it's possible in the stock market too.
What's the trick? Well, the market has a tendency to overreact, lifting popular stocks to really high levels as well as severely punishing stocks when something happens they don't like. If you can find an unpopular stock with strong fundamentals and a potential growth catalyst on the horizon, you could catch the wave as the market rushes back to the stock on a change in sentiment.
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While investing works best when you buy in with a long-term holding strategy, you can increase your chances of outsized returns if you happen to make that buy-in when the stock is priced at a discount. Here are five stocks priced at a discount that have what it takes to double up in 2022 if the right scenario plays out.
1. AT&T
Telecom giant AT&T (T 1.19%) is not what comes to mind when thinking of quick returns -- the stock price on this company is somehow down over the past decade. However, AT&T could easily double in 2022. The company has tightened its focus to what it does best and is offloading its entertainment and streaming holdings. That, of course, comes after putting itself in a mountain of debt, buying DirecTV for $67 billion in 2015, and Time Warner for $85 billion in 2018.
The company has gotten out from under DirecTV, selling it for $16.25 billion in 2021. It is spinning off the remainder of its entertainment assets in a deal with Discovery that will wipe 43 billion of debt off of AT&T's balance sheet sometime in 2022. The stock currently trades at a price-to-earnings ratio (P/E) of 8 and could trade back to its historical average P/E ratio of 18 after the deal closes.
2. Peloton Interactive
Fitness technology company Peloton Interactive (PTON 4.46%) was one of the proverbial "COVID stocks," seeing demand for its products accelerate during lockdowns. The company's revenue growth soared, and management responded by investing heavily into the business to keep up with demand. Unfortunately, demand has started to fall back to earth, resulting in Peloton's financials getting crippled. The stock price has fallen from its highs of $171 a share down to nearly $30.
Despite management's mistakes, Peloton's connected fitness segment remains a massive success. In the first quarter of fiscal 2022 (ending Sept. 30), Peloton's most recent quarter, connected fitness subscriptions grew 87% year over year to 2.49 million. The subscription business will eventually contribute more and more to the bottom line, which long-term investors can follow. The stock has declined so much that a sign of Peloton's financials rebounding could easily double the share price from these beaten-down levels.
PTON Revenue (Quarterly YoY Growth) data by YCharts
3. Digital Turbine
Our mobile phones are great advertising tools, precisely the business Digital Turbine (APPS 0.28%) is in. The company is in charge of preinstalling apps on new phones. When you boot up that new phone for the first time, those apps you already see have likely paid to be there. The stock has been a winner already, up more than 8,000% over the last five years.
However, the company has made a handful of acquisitions in the past year, which can cause uncertainty among investors, potentially causing a sell-off when the markets come under pressure as they have. However, Digital Turbine is very profitable, turning nearly $0.20 of every revenue dollar into free cash flow. If the company reassures investors that the business is running smoothly over the next few quarters, the stock could head back toward highs, doubling the share price.
4. Skillz
Mobile phones aren't just great for advertising. Gaming is one of the most popular uses for smartphones. Skillz (SKLZ -1.93%) runs a platform on which game developers can quickly launch competitive matches of their games where users play for real money and prizes. Skillz stock has fallen from grace, down a whopping 86% from highs. The reason? The company is spending more on sales and marketing than it generates revenue. Management is doing this mainly to fuel growth, but investors are likely punishing the stock for its money-losing ways in the current market environment.
But when you fall so far, there is ample room for recovery. In early 2021, Skillz and the National Football League struck a partnership to have a developer challenge. This challenge is ongoing, and the winning developer games will be launched on the Skillz platform with NFL marketing support and team licensing. The NFL is a massive brand, and if this goes well when the games get set to launch in the fall, the sentiment around Skillz might change for the better and quickly.
5. Opendoor Technologies
Buying and selling your home is a long, expensive, and tedious process, but Opendoor Technologies (OPEN 3.62%) is trying to change that. The company pioneered iBuying, where companies buy your home with a cash offer to quickly and easily take it off your hands. It then resells the house on the open market. Real estate is one of the largest industries in the world and has resisted major disruption for decades. Investors may still be skeptical of the business model, especially after Opendoor's largest competitor Zillow quit iBuying after sustaining major losses.
This skepticism has punished Opendoor's stock, and for good reason; iBuying is Opendoor's whole business, so bankruptcy is on the table if iBuying can't work. However, Opendoor is showing so far that its model might not be so crazy after all. For a company that did $2.3 billion in revenue in 2021 Q3, its most recent quarter, its net losses were just $17 million, indicating that the business is nearing profitability. The stock trades at a price-to-sales ratio of just 0.5, so if Opendoor shows a profit in 2022, the valuation leaves plenty of room for optimistic investors to bid the stock higher.
