There are cheap stocks, and then there are penny stocks. The former aren’t necessarily bad investments. The latter — defined as stocks trading at $5 or less — often turn out to be duds.
Let’s take a look at six cheap stocks that analysts love. For this article, cheap stocks will be those companies whose July 26 closing share price was $20 or less. In addition, they will be stocks where at least 10 analysts cover the business and have an average rating of “outperform” or “buy.”
I’ve been able to find 19 stocks that meet this criteria. Here are my six cheap stocks from six different sectors:
|TIGO||Millicom International Cellular||$15.23|
|HST||Host Hotels & Resorts||$17.97|
Cheap Stocks: Millicom International Cellular (TIGO)
There are currently 13 analysts covering Millicom International Cellular (NASDAQ:TIGO). Of the 13 analysts, nine rate it a “buy,” one rates it “overweight” and three have it as a “hold.” This makes for an overall rating of overweight. The median target price is $27.27, nearly double its current share price.
Miami-based Millicom provides mobile and fiber-cable services to consumers and businesses in Latin America. Its markets include Colombia, Panama, Paraguay and more.
In Q1 2022, Millicom’s revenues grew 4.5% on an organic basis to $1.41 billion. On the bottom line, its operating profit was $234 million, 126.3% higher than Q1 2021. The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) were $564 million, 55.8% higher than a year ago.
During the quarter, it added 320,000 mobile customers, of which 259,000 were in Colombia. That increased its subscriber base by 27%, to less than 40 million.
Despite all the good news, TIGO stock is down more than 40% year-to-date (YTD). Trading at 0.33x sales — lower than it’s been in the past decade — TIGO is an excellent cheap stock to consider.
There are currently 37 analysts covering Nio (NYSE:NIO). Of the 37, 29 rate NIO a “buy,” five rate it “overweight” and three have it as a “hold.” NIO stock an overall buy rating. The median target price is $29.96, 50% higher than its share price at the time of writing.
In May, I suggested that the electric vehicle (EV) maker’s product diversity made it an excellent long-term buy. At the time, it was trading around $16. It’s gained a few dollars since.
The latest drag on Nio’s share price is claims made by short seller Grizzly Research that it’s selling more batteries to its batteries-as-a-service (BaaS) business — Nio customers pay for electric batteries every month — than the number of customers using the service, inflating Nio’s sales.
The company has formed a board-level committee to examine the claims. As part of this investigation, it has hired an international law firm and forensic accounting firm to assist with the investigation.
Under $20, I consider Nio to be an excellent long-term investment.
Cheap Stocks: TechnipFMC (FTI)
There are currently 20 analysts covering TechnipFMC (NYSE:FTI). Of the 20 analysts, 14 rate it a “buy,” two rate it “overweight,” and four have it as a “hold.” This gives FTI stock an overall overweight rating. The median target price is $10, 20% higher than its share price at the time of writing.
Of all the stocks on my list, FTI is the only one under $10 and the closest to penny-stock status.
TechnipFMC is a pure-play technology and service provider for the offshore oil and gas industry. In 2017, Technip and FMC Technologies merged to form a leading business in the energy sector. In February 2021, the company spun off its Technip Energies (OTCMKTS:THNPY) business, which specializes in helping energy companies transition away from fossil fuels.
On July 5, the company announced that it signed a letter of intent with the Brazilian subsidiary of Equinor ASA (NYSE:EQNR) to carry out the frontend engineering and design studies for the energy company’s proposed gas and condensate greenfield development project offshore Brazil. The contract is worth more than $1 billion to TechnipFMC.
FTI finished the first quarter with a backlog of $8.9 billion, 23.2% higher than a year earlier. The company believes it could win $20 billion in projects over the next 24 months.
If this comes to fruition, FTI will have a double-digit share price before too long.
Azek Company (AZEK)
There are currently 19 analysts covering Azek Company (NYSE:AZEK). Of the 19 analysts, 16 rate it a “buy,” two rate it “overweight,” and one has it as a “hold.” AZEK stock has a buy rating overall. The median target price is $25, 16% higher than its share price at the time of writing.
In November 2020, I recommended AZEK as one of the year’s best initial public offerings (IPOs) to hold for the long term.
“Over the last two fiscal years, its sales have grown by 26% to $794 million, while it’s gone from an operating loss in 2017 of $26 million to an operating profit of $59 million in 2019. In the first nine months of 2020, sales are up 10% over last year, with a 3% increase in operating profits,” I wrote on Nov. 17, 2020.
Over the past five years, Azek’s net sales have increased by 17% compounded annually, while its compound annual growth rate (CAGR) for adjusted EBITDA increased by 20% over the same period.
In May, it reported Q2 2022 results, including a 35.2% increase in sales and 29% growth in adjusted net income. For all of 2022, it expects at least $1.39 billion in sales and an adjusted EBITDA of $316 million.
Down 54% YTD, AZEK could be the best buy of the bunch.
Cheap Stocks: Qualtrics International (XM)
There are currently 19 analysts covering Qualtrics International (NASDAQ:XM). Of the 19 analysts, 14 rate it a “buy,” two rate it “overweight,” and three have it as a “hold.” XM stock has a buy rating overall. The median target price is $18.50, 47% higher than its share price at the time of writing.
Approximately 85% of the Fortune 100 use the Qualtrics Experience Management platform to help their brands improve the customer experience. The platform combines a company’s data to analyze and deliver better customer, employee, product, and brand experiences for customers, employees, products, and brands.
Over the past year, XM stock has lost two-thirds of its value. Even when it reports significant revenue gains as it did in Q2 2022 — 43% revenue growth to $356.4 million and 39% increase in remaining performance obligations to $1.04 billion — it can’t seem to catch a break.
It lost 4 cents a share in the second quarter, while analysts expected it to break even. Its shares fell on the miss. Constellation Research analyst Holger Mueller is skeptical about its ability to make money.
“With Qualtrics’ professional services losing money, its core revenue engine is unable to keep up with its research and development, sales and marketing and general and administrative expenses,” Mueller recently stated.
One big positive is that Qualtrics is on Goldman Sachs’ list of conviction buys. It has a $40 target price, significantly higher than where it currently trades.
Host Hotels & Resorts (HST)
There are currently 19 analysts covering Host Hotels & Resorts (NASDAQ:HST). Of the 19 analysts, eight rate it a “buy,” four rate it “overweight,” five have it as a “hold,” and two rate it as underweight or sell. HST stock has an overweight rating overall. The median target price is $22, 25% higher than its share price at the time of writing.
The world’s largest lodging real estate investment trust (REIT) owns many luxury and upper-upscale hotels. The REIT’s present-day strategy got its start in 1996. At the time, it owned 77 full-service hotels and two limited-service hotels, providing 37,210 rooms. Today, it owns 78 hotels in the top 20 U.S. markets, providing 42,300 rooms.
In 2021, the REIT acquired $1.56 billion in hotels, with almost 40% allocated to purchasing the Four Seasons Resort Orlando at Walt Disney World Resort. It paid $610 million for the 448-room Four Seasons.
In February, Host paid $35 million in cash and issued $56 million in operating partnership units to acquire 49% of a joint venture with Noble Investment Group. This private equity firm specializes in extended-stay hotel assets. It also invests $150 million as a limited partner in one of Noble’s investment vehicles. The move gives the REIT access to an asset category it usually wouldn’t consider.
While the REIT’s Q1 2022 results were still down from 2019 comparables, they’re getting closer to pre-pandemic levels.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.