You don't need to have a huge pile of cash on the sidelines in order to start investing. In fact, in a 2022 environment in which many top growth stocks have been hammered, you can buy some of the market's most compelling under-the-radar growth stocks for under $10 apiece. Here are three of the most interesting examples of potentially explosive growth stocks at a sub-$10 share price.
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1. Figs
Whether it's "the next Lululemon" or "the Nike of healthcare," Figs (FIGS 0.21%) has the hallmarks of an explosive growth stock, and right now you can buy it for just over $8 a share. Last summer, shares of Figs were fetching $50 a share, but in 2022, rising interest rates and recession fears have hampered Figs, and it is down nearly 70% year to date. Still, this creates an intriguing buying opportunity for long-term investors to add this supercharged growth stock to their portfolios.
Figs is revolutionizing the healthcare apparel market by replacing boxy, uncomfortable scrubs with stylish, colorful offerings that take a page out of the high-performance athletic wear playbook. You may be thinking, that's all well and good, but why does that make Figs a great investment opportunity? First, Figs is growing revenue at an explosive pace. Figs increased its revenue by 59% from fiscal 2020 to fiscal 2021, with an increase from $263.1 million to $419.6 million. Zooming even further out, the company nearly quadrupled its sales over a two-year time frame, from $110.5 million in fiscal 2019 to $419.6 million in 2021. During the most recent quarter, Figs grew revenue by 21% year over year, at a time when investors were concerned that rising inflation would hurt demand for discretionary spending. During the quarter, Figs also grew to two million customers, good for an impressive 26% increase year over year.
Not only is Figs growing revenue fast, but customers also recognize Figs as a premium product and are willing to pay a premium for it. This enables Figs to boast impressive 71% gross margins. This tops even the gross margins of both Nike and Lululemon, the high-end performance apparel companies that Figs is often compared to. Maintaining elite gross margins over time is a recipe for success, and so far it looks like Figs is on this path.
If Figs can continue to grow revenue at this pace and maintain its enviable gross margins over time, the stock should be worth substantially more than it is today over time.
2. QuantumScape
If you're looking for a high-risk, high-reward investment below $10, it's hard to look past QuantumScape (QS -1.98%). QuantumScape is an early stage company working to develop solid-state lithium-metal battery technology for the electric vehicle industry and beyond. Shares currently trade at about $9, down 78% from their 52-week high of over $40. In the heady days of late 2020, the former SPAC (special-purpose acquisition company) even hit a price of over $100 a share. But rising interest rates and fears of a recession have curbed investor appetite for early stage, pre-revenue companies like QuantumScape, and the share price has fallen accordingly in this more risk-averse environment. If they are able to successfully mass-produce them, QuantumScape's batteries boast many advantages over the current generation of batteries. The company says that its batteries have longer lifespans, are lighter than existing batteries and that they improve charging speed with a 15-minute charge, which any current EV owner knows would be a game changer.
If the technology doesn't pan out or if it doesn't become widely adopted by automakers, the stock will not have much upside. But if QuantumScape's technology works out and automakers implement it on a wide scale, it would be a huge win for both the electric vehicle industry and for QuantumScape stock. This success would make QuantumScape stock worth many times what it is today. Considering this wide spread of outcomes, alongside the potential to disrupt a massive end market, QuantumScape shares are worthy of a small investment allocation in a broader portfolio for risk-tolerant investors.
3. Origin Materials
Speaking of high-risk, high-reward former SPACs that have the potential to disrupt huge end markets, let's close with Origin Materials (ORGN 1.77%). Origin describes itself as "the world's leading carbon negative materials company."While the company never hit quite the same heights as QuantumScape, at one point traded at just over $14 a share. However, now Origin Materials' stock is down 35% from its 52-week high and is currently changing hands at just over $5.
Origin Materials is exciting in that it is seeking to replace plastic in applications like plastic bottles with its low- and negative-carbon feedstocks made from materials like wood, wood chips, and cardboard. Plastic bottles can be harmful to the environment because if they are thrown out instead of recycled, they do not degrade for many years. Origin's patented product improves upon this by replacing the plastic with biodegradable material.
This solution sounds exciting, but there plenty of pipe dreams out there that never become good investments. Origin looks like a more concrete opportunity because it is working with major players in the consumer packaged goods space, including Pepsi, Nestle, and Danone, which it counts as both customers and investors.
Furthermore, Origin's solution isn't limited to removing plastic bottles from the supply chain. Origin is working with Primaloft to make insulation for outdoor wear and bedding. The company estimates that the total addressable market for Origin products is $1 trillion.
Origin has incredible potential, but this is still an early stage company and its products have not yet reached wide-scale adoption. Therefore, caution is warranted. Still, I like the risk-reward profile here and view Origin as worthy of a measured investment allocation for risk-tolerant investors.
Get started with $10
These stocks have all fallen from their previous highs and carry some risk going forward for the reasons outlined above, but they also represent the opportunity for some significant long-term returns as well. All three of these growth stocks harbor explosive potential, and you can buy any of the three now with the spare Alexander Hamilton that's under your couch cushions.
