With the proliferation of online brokerages offering no-commission trades and fractional shares, fewer companies are splitting their stocks, leading to per-share prices that may make some investors feel those stocks are out of reach. Fortunately, some great companies are still out there with share prices below $20.
Investors should avoid hunting for investment ideas based on share price alone, as some shares trade for less because they're a bad investment. That said, some fantastic companies with low share prices are worth considering. Let's take a look at two.
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Matterport: mapping the metaverse
Matterport (MTTR -1.25%) is new to the public markets after merging with a special purpose acquisition company (SPAC) last July. Matterport's business is making digital versions (which they call digital twins) of real-life buildings and spaces. Essentially, the company believes these digital twins will allow its customers to make decisions about their spaces virtually rather than needing to see the spaces in person.
When Matterport reported its third-quarter 2021 earnings in November -- its first earnings report as a public company -- the results were positive. Revenue grew 10% year over year (YOY), reaching $28 million. Of that total revenue, nearly $16 million came from subscriptions, 36% higher than Q3 2020. It's good to see subscription revenue outpacing overall revenue because it brings with it better gross margins.
The company is not yet profitable and is pouring resources into growing its customer base. At the end of Q3, Matterport had 439,000 customers, an increase of 116% YOY. Total spaces under management (the number of spaces for which they had created a digital twin) reached 6.2 million, up 62% from the year-ago quarter. These numbers are important as management believes their total addressable market to be more than four billion buildings and a $240 billion market opportunity.
Matterport also presents an obvious and interesting play on the metaverse. If the metaverse becomes the next big thing, Matterport is already creating these digital twins and could play an important role in this space in the future.
At the time of this writing, shares trade at $6.78, so a $20 investment could net a few shares of this exciting company.
Magnite: riding the digital advertising tailwinds
With shares trading for $11.23, digital advertising company Magnite (MGNI 0.16%) presents a great investment opportunity for less than $20. Magnite is the largest independent sell-side (aiding those with ad space available to fill it with ads) advertising platform. Operating primarily in the connected television (CTV) space, Magnite is riding the tailwinds of the ever-expanding streaming television space.
As more people move their media consumption to streaming across multiple devices, the percentage of advertising dollars spent on these platforms will continue to grow. In fact, CTV ad spending in the U.S. is forecast to exceed $17 billion in 2022.
Magnite has shown its ability to grow alongside this secular trend. In Q3, Magnite grew revenue 116% YOY. More importantly, the percentage of total revenue from CTV grew to 38% of overall revenue compared to 18% in the prior year's Q3. This demonstrates that Magnite is benefiting from the CTV ad-spending trends seen across the industry.
Magnite is not the only player in this space, but the growth anticipated in this space is vast enough that there can be many winners. Not only is Magnite's stock price under $20, but it's also trading at a very attractive valuation. With a price-to-sales (P/S) ratio of 5, Magnite is trading at the same multiple as it did in mid-2020. It's also less expensive than its sell-side competitor PubMatic, which has a P/S ratio of 8.
The bottom line for investors
The market is full of strong companies at all different per-share prices. When it comes to stocks under $20, both Matterport and Magnite show strong results in growing industries. Both are worth considering buying now and holding for the long term.
