For newer investors or those who have limited money to invest, it can sometimes be difficult to know where to deploy capital into the stock market. Depending on the brokerage being used, there may or may not be an opportunity to buy fractional shares. When that option is not available, the price of a stock does matter.
The good news is that there are great businesses to invest in at any price range. There are great stocks to buy with low per-share prices and weaker companies that trade for high per-share prices. The best investors learn that the price of a stock has no bearing on the strength of the business. Let's take a look at the best stocks to buy with only $700.
ASML
Based in the Netherlands, ASML (ASML 2.04%) may be the most important company you've never heard of. The semiconductor industry has many companies doing a variety of things. Some companies design chips, others manufacture them, and a few do both. ASML has an interesting and vital role to play in this industry. It designs and manufactures the machines needed to make all the world's chips.
ASML builds and sells lithography machines, which are necessary for the chip manufacturing process. For the most advanced chips, ASML sells extreme ultra violet (EUV) Lithography machines. It is the only company in the world that does so.
In the most recent quarter, ASML reported year-over-year revenue growth of 27% and a 39% increase in earnings per share. Over the last 12 months, the company generated over $6 billion in free cash flow. These results are common for ASML, and management expects full-year 2023 revenue to be 30% higher than 2022.
The semiconductor industry is cyclical, and some other chip designers and manufacturers have seen areas of weakness due to lower consumer demand around the world. ASML is well positioned, as it has more orders for its machines than it can fill. This $41 billion backlog buys the company plenty of time while the semiconductor industry experiences some weakness.
DigitalOcean
When it comes to cloud computing, DigitalOcean (DOCN 3.30%) is not the first business that comes to mind. In a cloud market dominated by tech giants like Amazon, Alphabet, and Microsoft, DigitalOcean is carving out a niche and doing it successfully.
DigitalOcean caters to small and medium-sized businesses to provide them with the cloud support they need. The goal is to take this task off the plate of these smaller companies that don't have the employees or financial resources for a large IT department. According to DigitalOcean, the market for small and medium-sized businesses that need cloud infrastructure is expected to grow from $98 billion today to $195 billion by 2026.
One exciting metric to keep an eye on with DigitalOcean is how it's growing its larger customers. The number of customers that spend more than $50 per month grew 42% year over year in the most recent quarter. This is important because these larger customers are more valuable than smaller companies.
For example, despite accounting for only 24% of total customers, this group totals 150,000 accounts, and makes up 86% of DigitalOcean's monthly revenue. This has helped total average revenue per customer (ARPU) increase by 14% year over year.
Despite these strong numbers, DigitalOcean is experiencing slowing growth, and it lowered some of its full-year guidance. The market reacted harshly to this news, and the stock fell 25% the following day.
However, despite the expectation for lower revenue and adjusted earnings per share in the second half of the year, the company still expects its adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) and free cash flow margins to remain the same. This suggests the business is run efficiently and can absorb bumps in the road.
This slowing growth is worth keeping an eye on, but the sharp decline in share price provides a compelling buying opportunity for a company that continues to grow its customers in an important segment of the technology sector.
