2 Stocks Under $10 to Buy in May

It's fair to say that ten bucks won't take you a long way these days, but that doesn't always apply to the stock market. There's no shortage of interesting investments trading in the single digits.

Carnival (CCL 2.58%) (CUK 2.56%) and Nu Holdings (NU 0.55%) are both trading under $10 right now. Low-priced stocks are naturally going to be pretty risky. You don't fall out of favor by accident. But let's take a closer look at why these two investments might not be trading in the single digits for long.

1. Carnival

There's no denying that the cruise ship industry has taken the longest time to get back to pre-pandemic revenue levels within the realm of travel stocks. Most ships were unable to take on passengers for more than a year, and when fleets did come back, they faced capacity constraints and international travel restrictions. 

We're finally getting back to normal. Analysts see Carnival's top line soaring 72% to $20.9 billion in its fiscal year (which ends in November), finally topping fiscal 2019's record revenue. After so many false starts and canceled voyages, passengers are comfortable making cruise plans again. The company experienced its highest booking volumes for all future sailings for any quarter in its recently reported fiscal first quarter. 

Image source: Getty Images.

The bottom line will take a little longer to recover, but momentum is starting to turn positive. Carnival spent most of the COVID-19 crisis posting larger deficits than Wall Street was forecasting, but the company is finally delivering bottom-line beats again. 

 Data source: Yahoo! Finance. EPS = earnings per share

Analysts see a return to profitability during the seasonally potent summer quarter this year, snapping a streak of 14 consecutive quarterly losses. Full-year positive earnings will likely have to wait until next year, but Carnival -- the largest of the cruise line stocks -- should face smooth sailing after that.

• Fiscal 2024 EPS: $0.77
• Fiscal 2025 EPS: $1.14
• Fiscal 2026 EPS: $2
• Fiscal 2027 EPS: $2.51

Carnival had to raise a lot of money just to stay afloat in 2020 and 2021, but it's in great shape now. It has $8.1 billion in liquidity, and it's about to return to profitability. The stock is trading for less than four times estimated fiscal 2027 earnings. This shouldn't be a stock dog-paddling in the single digits at this point in its dramatic sea rescue. 

2. Nu Holdings

There's more to fintech in Latin America than just MercadoLibre's (NASDAQ:MELI) Mercado Pago subsidiary. Brazil's Nu Holdings is a fast-growing and recently profitable provider of digital financial services in its home country as well as Mexico and Colombia through its Nubank platform. It began this year with 74.6 million global customers, a 38% increase from the 53.9 million it was serving a year earlier.

In terms of active customers, Nubank is the fifth largest financial institution in Brazil and the sixth largest in Latin America. It recently announced that it had topped 80 million accounts by early April, and we'll get some more color on that when it reports first-quarter results in two weeks. 

The runway is long here. Nu is growing considerably faster than legacy banks, and unlike most financial platforms that have a love-hate relationship with their customers, Nubank is well liked with an industry-leading Net Promoter Score. There's probably a reason Warren Buffett was an early investor here. Average monthly revenue per customer is up 37% to $8.20 over the past year on a foreign-exchange neutral basis, a far cry from its traditional banking peers, which are nearly three times higher at $23. 

Revenue soared 142% in its latest quarter, and Nu has been profitable on an adjusted basis in back-to-back quarters. The top-line gains will decelerate at this point, but you don't see profitability and explosive growth in a low-priced stock very often.