Stocks are the one area where lower prices tend to reduce interest. Unlike a sale on retail items, investors perceive falling prices as a sign of distress and tend to sell, if they respond at all.
Admittedly, factors such as valuations, competitive advantages, and revenue tend to hold more sway than nominal prices. Nonetheless, some quality businesses sell for less than $10 per share, and stocks like SoFi Technologies (SOFI +0.25%) and Palantir (PLTR 1.65%) deserve such consideration despite (and not because of) their low nominal cost.
SoFi
SoFi may look like a stock to avoid in many respects. It made its public market debut via a special-purpose acquisition company (SPAC) in June 2021, a category that has not performed well, and it has fallen nearly 80% from its all-time high. Also, its ties to the student loan business may hamper it amid a moratorium on debt payments effective for the remainder of the year.
NASDAQ: SOFI
Key Data Points
However, SoFi has also become one of the few fintech stocks to hold a bank charter thanks to its purchase of Golden Pacific Bank. This allows it to offer checking and savings accounts and make loans without the involvement of a third party.
Also, other purchases have bolstered its fintech bona fides. Both Galileo and Technisys place SoFi in the center of supporting payments cards and powering ACH transactions. It compares itself to Amazon's AWS, describing itself as an "AWS of fintech" that supports an "end-to-end banking technology stack." Such functionality helped take its total member count to 4.3 million at the end of Q2, 69% more than one year ago.
Moreover, it brought in $693 million in net revenue in the first half of 2022, a 62% increase from with the same period in 2021. Expenses rose 17% during that time, leading to a loss of $206 million. In comparison, SoFi lost $343 million in the first two quarters of 2021.
Admittedly, money-losing companies have struggled in the current market, but SoFi's continuing revenue growth might make it an exception. It forecasts about $1.51 billion in adjusted net revenue for the second half of 2022, which would amount to a surge of about 50%.
Additionally, its price-to-sales (P/S) ratio now stands at around 3.9. This compares to a P/S ratio exceeding 10 just over one year ago. As the student loan moratorium expires and more customers turn to banking with SoFi, this stock could eventually turn profitable and gain considerable traction.
Palantir
Palantir has become another notable victim of the bear market as worries about growth have hampered the stock. Moreover, in the popular but not well-defined world of big data, it might not stand out as much as it should.
Nonetheless, it differs significantly from other big data companies. Palantir analyzes data to draw conclusions and recommend courses of action. It does not focus on data storage like Snowflake or data presentation like Alteryx.
Palantir depends on the Apollo software deployment platform, which supports two decision operating systems. One is Gotham, designed for national security and law enforcement purposes. While not the fastest-growing part of Palantir, it could see increased demand as geopolitical stability around the world deteriorates.
Second, with the limited number of clients for Gotham, the company developed the Foundry OS to run analyses in the business realm. Foundry recently landed Hyundai Heavy Industries Group as one of its new clients. In this case, Palantir will probably help Hyundai find efficiencies that streamline operations.
With its growing client base, Palantir reported $919 million in revenue in the first half of the year, 28% more than in the same period last year. Growth was strongest in U.S. commercial segment, which grew by 136% and 120% in the first and second quarters, respectively.
Palantir reported $24 million in adjusted earnings, meaning non-generally accepted accounting principals (GAAP), down from $181 million the year before. The company had unrealized losses on currencies and equity investments of $196 million during that time, leading to a first-half net loss of $280.1 million. That may have also contributed to the stock's slide, down by more than 70% during the past year.
NASDAQ: PLTR
Key Data Points
For 2022, Palantir expects about $1.9 billion in revenue. Although that would be 23% more than in 2021, it would represent a slowdown in growth. The shares sell for about eight times expected 2022 sales. Considering our increasingly dangerous world and the need for enterprises to increase efficiency, now might be the time to buy Palantir.
