Some deep-value investors don’t mind picking up extremely battered stocks that may have seen their intrinsic value swing to the downside. So, it makes sense to look at some plays now trading at less than $20 per share.
Indeed, it’s not all penny stocks or extremely risky speculative small-caps that are down there, either. Some mid- and even large-caps go for $20 or less, but probably not by design.
Often, a larger-cap stock goes for under $20 per share because it’s under considerable pressure. Perhaps the large cap under question has shed more than 80% of its value from peak levels. Such severe distress may entail damage to the fundamentals.
Though many folks heavily discount such battered stocks, I do see the potential for deep undervaluation. Being contrarian isn’t enough to score good returns, though. You also need to be right, proving the majority wrong about a certain name.
Let’s examine two battered tech stocks and one ailing consumer play that could prove their doubters wrong in a big way. I’d watch them in June 2024 to see how they fare in the second half.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is an intriguing neobank company that has room to grow. It seeks to offer a slew of new tech-driven financial services to its mostly young user base. Undoubtedly, it wasn’t too long ago when some thought SoFi would change the way Millennials (and perhaps Gen Z’s) viewed digital banking.
Most of the euphoria has faded, with SOFI shares now down more than 72% from its $25 and change peak. The stock goes for $7.45 per share today. I continue to see the $7.5 billion innovator as a disruptor with ample ground to gain.
Mizuho Securities analyst Dan Dolev seems incredibly bullish on the stock after a recent solid quarter that included surprising guidance. At an absurd 1.26 times price-to-book (P/B), a margin of safety is baked in.
Therefore, it will be interesting to see how management moves the firm through its “transitional year.” If SoFi can start flexing its tech muscles a bit more, expect accelerated growth.
Bumble (BMBL)
Bumble (NASDAQ:BMBL) is another tech firm trying to turn a corner after shedding most of its value from peak levels. Today, shares of the dating app company are down around 85% from its 2021 all-time highs of around $75 per share. Just a few years ago, Bumble seemed like an innovative company seeking to disrupt the dating app scene. Bumble’s unique approach gave many hope that it would succeed.
Fast forward to today, the stock goes for a fraction of its peak price at $11.97 per share. And, the Bumble app hasn’t proven radically better or more different than its rivals. In fact, Bumble seems to be getting more similar to its rivals, with a recent change that no longer requires women to make the first move. Additionally, Bumble seems poised to hop aboard the AI bandwagon, just like many of its peers.
If Bumble gets AI right, there’s a ton of market share to gain. Perhaps superior matching AI could be the ultimate differentiator. Either way, the stock looks cheap at 20.2 times forward price-to-earnings (P/E). At these depths, BMBL stock may be worth the risk. The firm looks to add to its recent post-Q1 earnings strength under the leadership of its new Chief Executive Officer (CEO) Lidiane Jones.
Hanesbrands (HBI)
Apparel firm Hanesbrands (NYSE:HBI) has been steadily descending for around nine years now. Though there was a short-lived boom in early-2021, the stock gave back all of the gains and then some. It eventually plunged to depths not seen since its rise of out of the stock market crash of 2008-09.
Indeed, shares of the clothing company seem like a lost cause at less than $5 per share, with a market cap of $1.7 billion. Still, I think patient deep-value investors may have a lot to gain as the firm takes baby steps to recover from its most recent spill despite serious demand-side headwinds.
At 11.9 times forward P/E and 0.3 times price-to-sales (P/S), HBI stock certainly seems to be one of those severely undervalued plays that could rocket higher on the back of even the mildest hint of good news.
Sales dipped 17% in the first quarter as the Champion brand continued to weigh. Though shares look deeply undervalued, they could stay that way for some time until management can stop the bleeding. Until there’s more evidence of this, I’d stash the stock on the radar rather than buy now.
On the date of publication, Joey Frenette did not hold (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.