But that doesn’t mean there aren’t diamonds in the rough. These cheap stocks trade at low multiples and per-share pricing, but with a catch: each tends toward the speculative, with long-term prospects demanding patience as trends and tech matures. If you’re willing to wait, though, these cheap stocks to buy represent some of the few remaining deals on the market.
indie Semiconductor Inc (INDI)
Semiconductor stocks may have surged over the past year, but that doesn’t mean the sector lacks its own slate of cheap stocks. Even as giants like Nvidia (NASDAQ:NVDA) and Taiwan Semiconductor (NYSE:TSM) face overvaluation, investors are increasingly uncovering small-cap and cheap semiconductor stocks in search of the next significant breakthrough. Among these, indie Semiconductor Inc (NASDAQ:INDI) stands out with its robust offerings tailored for the automotive and autonomous driving sectors, meeting the rising demand for cutting-edge car technologies, including driver assistance and enhanced infotainment systems.
In 2023, indie Semiconductor shattered records by doubling its revenue to $223.2 million. Furthermore, the company’s profit margins impressively reached 52.5%, marking an increase of more than 2.5% from the previous year. This margin growth demonstrates indie Semiconductor’s ability to excel amid changing economic landscapes by enhancing efficiencies and reducing costs without compromising quality. Though not yet profitable, its low debt load and slim 4x price-to-sales ratio make it a standout play among cheap semiconductor stocks – a sector that’s increasingly shrinking today.
Cheap Stocks to Buy: Sirius XM Holdings Inc (SIRI)
If there’s any reliable quality indicator for cheap stocks to buy, it’s a Warren Buffett endorsement. And with Buffett snagging as much Sirius XM Holdings Inc (NASDAQ:SIRI) stock as he can, this cheap satellite radio stock may be preparing for takeoff. Throughout Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) last few financial periods, Buffett and team focused primarily on selling stocks rather than bargain hunting new buys – with a few exceptions, including Sirius.
Buffett values Sirius XM not just for potential corporate restructuring but as a solid value investment in its own right. Trading at low multiples, Sirius XM’s sales are steady and reliable (if not spectacular). The company boasts over 30% EBITDA margins for four consecutive years and free cash flow surpassing $1 billion in the same period. Additionally, Sirius XM offers an appealing 4.69% dividend yield with a 31% payout ratio, showcasing the company’s adept cash management that still takes reinvested earnings and growth into account.
Symbotic (SYM)
Cheap robotics and automation stock Symbotic (NASDAQ:SYM) is revolutionizing how major corporations, including Walmart (NYSE:WMT) and Target (NYSE:TGT), handle their warehouse operations. The company uses AI to streamline warehouse robotics platforms, enabling quicker and more efficient selection, packing, and shipping of goods than traditional methods. This enhances safety and saves significant cash. While currently serving high-profile brands, Symbotic’s strategic shift towards broader accessibility could skyrocket the value of this robotics stock.
Symbotic is crafting a strategy to extend warehouse automation and robotics to small- and medium-sized businesses (SMBs) that lack the resources to implement the efficiencies that giants like Walmart and Target enjoy. By focusing on multi-user warehouse complexes and integrating these services into the buildings as part of a leasing incentive rather than direct sales to SMBs, Symbotic is looking to capture a vast, largely untapped SMB market. Although big-name brands currently represent a major revenue source, tapping into the SMB sector could generate a continuous revenue stream for Symbotic, positioning the company for sustained financial success – meaning its cheap stock status likely won’t last.
Cheap Stocks to Buy: Rocket Lab USA (RKLB)
Rocket Lab USA’s (NASDAQ:RKLB) recent stock dilution unsettled retail investors, but a temporary dip in share price shouldn’t deter you from the cheap stock’s significant long-term potential. Last year, Rocket Lab set records with unprecedented launch stats and secured a $515 million contract to construct and maintain 18 space vehicles for the U.S. government.
The company’s impressive performance in 2023 shines through in its end-of-year report despite annual per-share losses of $0.38 falling short of analyst projections. It’s important to note that Rocket Lab, while not in the pre-revenue stage, is a burgeoning entity in the high-stakes realm of space exploration, trading current losses for the prospect of a tenfold increase in value.
This growth potential is clear from Rocket Lab’s existing backlog or customer order tally, which more than doubled in 2023, reaching $1.04 billion, up from $582.4 million in 2022. Although immediate conversion of orders into profits isn’t feasible, the company’s substantial backlog provides a glimpse into its future cash flow. Rocket Lab anticipates recognizing nearly half of this total backlog as revenue within the next 12 months, potentially mitigating the impact of recent stock dilution in the short term.
Chegg Inc (CHGG)
Trading at just 6.5x earnings and 0.78x value, Chegg Inc (NYSE:CHGG) stands out from other cheap stocks based on its current (under) valuation and its long-term growth trajectory that many Wall Street players are seemingly ignoring. This year, traditional learning institutions, including some of the most prestigious ones, faced increasing scrutiny and skepticism. I think artificial intelligence and the varied tech arising from increased remote work trends will trigger massive sea changes in how we go about education, with Chegg as one of the few recognizing the sector’s latent strength.
Chegg is incorporating AI into various learning tools, with its new AI-powered personalized learning assistant based on OpenAI’s GPT-4 taking center stage. This innovation stands out as one of the EdTech sector’s most successful, if not the sole, applications of such advanced AI tools.
Of course, pioneering next-generation tools often come with high costs and unpredictability at the start of their lifecycle. While past ZIRP-era stocks may have overcome the cash crunch on sentiment and momentum alone, Chegg hasn’t been quite as lucky. Consequently, Chegg’s shares have fallen over 35% since the beginning of 2024, following an earnings report that fell short of expectations alongside a conservative outlook. Nevertheless, Chegg’s management has framed this downturn as part of the R&D process for AI in EdTech, describing the development as “ongoing and iterative.” They have cautioned that it’s too early to forecast a timeline for revenue and margin recovery due to R&D expenses. Still, at a low relative valuation and cheap stock status, Chegg is a moderate value play coupled with a long-term growth thesis.
Cheap Stocks to Buy: Valley National Bancorp (VLY)
As Fed rate cuts slowly materialize, banking stocks will go one of two ways: companies with limited debt or the size to manage it, like the legacy mega-banks, will likely see shares tick downward a net interest income dries up. On the other hand, smaller regional banks with higher relative leverage and local real estate lending operations will finally be somewhat freed from oppressive borrowing rates and reduced consumer loan interest. And few regional banks stand out as quality cheap stocks as Valley National Bancorp (NASDAQ:VLY).
Valley National’s stock trades at a bottom-barrel 0.6x book value and 7x earnings, marking it as both undervalued and frequently overlooked. Its strong balance sheet and low debt load, evidenced by a debt-to-equity ratio of just 0.56 compared to the industry average of 1.2, highlight the bank’s relative lack of leverage compared to competitors. The bank’s recent stock buyback initiative and a 5.97% trailing dividend yield further affirm its financial health.
Analysts generally regard Valley National as undervalued, with an average price target of $9.50 €” about 25% above its present share price. Beyond the bullish outlook, broad sentiment surrounding the bank stock is on an uptick as 56% of analysts now recommend investors “hold” Valley National, a massive improvement from the 50% who advised selling in the previous evaluation period.
Samsara (IOT)
The term “Internet of Things” concept often evokes images of connected refrigerators and home alarm systems, but these consumer-facing examples barely scratch the surface of the broader IoT sector. Cheap stock Samsara (NYSE:IOT) is near the top of the wider IoT sector, expanding the IoT concept to serve enterprise and industrial operations better. The company focuses on fleets, transportation, and heavy equipment, aiming to streamline operational workflows, enhance movement tracking, and improve safety overall.
In its most recent report, Samsara celebrated a milestone year, achieving a 39% year-over-year increase in recurring revenue. The company also saw its recurring customer base grow by 49%, generating a solid $27 million in free cash flow. As a relatively young company introducing cutting-edge technology, Samsara’s growth potential is untapped and unlimited. And, as both the company and tech mature, Samsara is set to snag greater market penetration as legacy businesses turn to new tech; management aims to expand its operational reach by targeting larger clients that are currently just beyond its grasp.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.