3 Large Caps Under $20 With Good Upside
As far as low-priced stocks, those are few and far between as well, especially in the large-cap space. Only 3% of S&P 500 names have share prices belo...
Although the S&P 500 limped to the finished line on Wednesday, it managed to climb within less than a point of its record intraday high from last week. This week's rally has been rather broad based with all 11 sectors finishing green on Monday.
With the major indices near record levels, investors are finding it harder and harder to find a good bargain. In terms of valuation, many stocks are fittingly trading near their five-year high P/E ratios.
As far as low-priced stocks, those are few and far between as well, especially in the large-cap space. Only 3% of S&P 500 names have share prices below $20. More than half of the companies in the index now trade above $100 per share.
This means large-cap investors that favor low-priced stocks must look outside the box whether it be overseas or in other benchmarks. We've done just that here in sharing three large-cap stocks will small prices—but big upside.
What is Sibyane Stillwater's Biggest Asset?
At the depths of the pandemic market crash, South African mining company Sibayne Stillwater (NYSE:SBSW) dipped back into penny stock territory. It has since staged a strong rebound alongside the resurgence in commodity prices. The stock has peaked above the $20 on a few occasions this year and the recent pullback to the $16 level is looking like a good entry point.
As far as mining stocks go it doesn't get much cheaper than Sibayne Stillwater. It trades at just 3x forward earnings compared to the 10x industry average. Several Wall Street analysts have taken notice of the valuation in calling the stock a 'buy'. A month ago, RBC Capital reiterated its 'buy' rating and $30 price target. Soon thereafter JP Morgan bumped its target up to $23.
In recent days mining stocks have faltered in the wake of the Fed's revamped expectation for a rate hike by 2023. This has at least temporarily made commodities like gold and silver less attractive as safe haven investments.
But with gold a smaller part of Sibyane Stillwater's earnings these days, the market isn't giving enough credit to the company's growth prospects in platinum which accounted for 84% of adjusted EBITDA last year. Given platinum's applications in green energy, i.e., hydrogen fuel cells, this won't be a sub-$20 stock for much longer.
Is Tencent Music Entertainment Group Stock Oversold?
After climbing above $30, Tencent Music Entertainment Group (NYSE:TME) is on a five-month losing streak and a week away from it becoming six months. The stock is still reeling from a March 24th plunge that seemed to have little basis other than valuation concerns.
To be fair, China's music streaming leader was due for a recalibration as its trailing P/E ratio had climbed above 60x. Last year's 15% revenue growth paled in comparison to the lofty valuation.
With the stock price now cut in half and the P/E a more palatable 34x, Tencent Music should have no trouble growing into its valuation. It now has a stranglehold on China's massive online music market thanks to wildly popular apps like QQ Music and WeSing. The social media features of the platform make it a must-have service in Chinese pop culture.
Last quarter Tencent Music's paying user base increased 43% year-over-year to 60.9 million. Yet with roughly 1.4 billion people living in China, the company has just scratched the surface of a massive growth opportunity.
As Tencent continues to capture the imaginations of China's younger generations, analysts see the stock moving higher. Following the most recent quarterly report, eight firms called the stock a 'buy' while three said 'hold'. The buys have target prices ranging from $19 to $27. Now that should be music to investors' ears.
Does Zynga Stock Have More Upside?
Social gaming company Zynga (NASDAQ:ZNGA) has enjoyed a nice run this year but is still a low-priced stock trading around $10. Its interactive online game portfolio is gaining momentum thanks to its availability on popular social media platforms like Facebook as well as on Apple and Android devices.
With few opportunities for social interaction during the pandemic, many people have leaned on Words With Friends, Empires & Puzzles, FarmVille, and other ad-free Zynga favorites for entertainment and human connection. This helped the company rake in a record $2.27 billion in bookings last year.
Can Zynga build off this success in 2021 even as the economy reopens, and people return to non-gaming social activities? Analysts certainly think so. They see bookings rising another 28% this year and EPS catapulting from $0.07 to $0.41.
That's because a large portion of its loyal user base will continue to embrace new product launches and live services. Meanwhile, Zynga still has plenty of room to grow overseas. Less than 40% of revenue is derived outside the U.S. and several markets in Asia represent particularly strong growth opportunities.
At 25x forward earnings, Zynga's valuation is neither pricey nor cheap. But many analysts think there is room for multiple expansion. Last month BMO Capital gave the stock its 16th straight 'buy' rating and matched Wedbush's Street-high $15 target. With 46% potential upside, Zynga should be 'game on' for large cap bargain hunters.
Featured Article: What is dollar cost averaging (DCA)?
Entrepreneur Editors' Picks
This Founder Quit His 'Prison'-Like Teaching Job Within 2 Months. Now, He and His Sister Are Helping Other Teachers Leave the Classroom and Achieve Financial Freedom.
If You Focus on Problems, You'll Only Find More Problems. Here's How to Focus on Solutions.
Facing More Than 15 Years in Prison, This Founder Transformed His Hustle Into a Powerful Personal Brand and Business. Now, He's Giving Back in a Big Way.
Apple Asks This Jarring Interview Question as a Secret Way to Evaluate a Candidate