They say not to judge a book by its cover. You could say the same for low-priced stocks; they have something of a reputation. However, much of that reputation for low-quality and high-volatility comes from penny stocks.
Yet, if 2022 has taught us anything, it's that well-known, high-priced stocks are just as susceptible to significant drawdowns. PayPal (down 63%), Netflix (down 71%), and Shopify (down 77%) offer three examples of stocks that traded well above $200 a year ago but have lost more than half of their value in only six months.
In point of fact, low-priced stocks can be great investments; you just have to know where to look. With that in mind, let's explore three fantastic tech stocks that trade at under $20.
Snap is one of the largest and best-known technology companies with a stock price under $20. The company operates Snapchat, a camera application that allows users to capture and share images and video. The app also utilizes various augmented-reality (AR) filters and lenses, some of which include ads.
Snapchat caters to a young demographic, and the company boasts that most young people in developed economies know and use Snapchat frequently. And while Snapchat certainly has an appealing audience for advertisers, the company has struggled recently due to three main problems:
- Competition from TikTok.
- Advertisers spending less amid macroeconomic concerns.
- Lack of non-ad revenue.
As for TikTok, U.S. authorities might intervene to Snap's benefit. There are growing calls by policy makers to restrict TikTok in the U.S. due to security concerns. Meanwhile, Snap recently announced that it is introducing a new $3.99/month subscription plan called Snapchat+ that unlocks certain features for users. It's unlikely to solve Snapchat's reliance on advertising, but it's a good first step.
Snap shares have plummeted more than 72% year to date and now trades at around $13. The company's market cap has shrunk from over $72 billion at the start of the year to a mere $21.2 billion today. Yet, I'm still bullish on Snap. The company's young user base will only grow older with time. As they do, and provided they continue using Snap, they'll have more disposable income that appeals to advertisers. Moreover, any restrictions placed on TikTok would greatly benefit Snap.
Electric vehicles (EVs) are a secular trend that no one should ignore. Just last week, ExxonMobil Chief Executive Officer Darren Woods stated that by 2040, all new cars sold in the U.S. would be EVs. I think that timeline is unlikely, but there's little doubt there will be many more EVs on the road in 2040 -- it's just a question of how many.
And with all those EVs going to and fro, you have to wonder, "where will they recharge?" The obvious answer is at home, where owners can plug in their EV and go about all the things they do at home. But what about when you're on the road and need a charge? Gas stations are ubiquitous, but electric charging stations are still hard to find in many parts of the country. Massive investment in charging stations will need to occur to make owning an EV in the U.S. practical.
That's where Blink Charging Co. comes in. It makes residential and commercial charging equipment. Its products speed up the charging process, saving EV drivers time at home or on the road. The company boasts supercharged revenue growth of 339%, but its overall revenue is still tiny at only $29 million. However, if America is going electric, Blink's modest revenue will soar as charging stations spring up like mushrooms all over America.
With shares trading around $16, Blink is a low-priced stock that investors with a bullish view on EVs should consider.
Semrush Holdings helps its customers succeed on the web. The company is an all-in-one digital marketing platform that provides software as a service (SAAS). It provides tools that facilitate search engine optimization (SEO), competitor research, and social media marketing. To put it bluntly, Semrush helps its clients get clicks. Some tools measure how well customer websites are tailored to search engines like Google and Bing. Others suggest how to improve layout, content, or page design to generate more clicks from leading search engines.
With a market capitalization of only $1.8 billion, Semrush is still a tiny player in the digital advertising world when compared to mega-caps like Alphabet, Meta Platforms, or Amazon. Nevertheless, its tools are sought out by digital marketers seeking to help businesses increase traffic to their websites.
Semrush generated $205 million in revenue during the last 12 months, up 43% year over year. Its gross margins are an impressive 80%; however, the company has yet to turn a profit. Analysts expect revenue to grow between 25% and 35% over the next two years as the company moves closer to profitability.
This one's not for the faint of heart -- Semrush is down 37% year to date. Yet the stock has bounced off its May low of $7.41 and is now trading near $13 a share. For investors willing to roll the dice on a speculative small-cap internet stock, Semrush might be a name to consider.