Stocks under $10 pique our interest because they have room to grow (as well as the most affordable option contract premiums). That doesn’t mean they’re bargains though, and we urge investors to be careful as many have risky business models.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three stocks under $10 to swipe left on and some alternatives you should look into instead.
Opendoor (OPEN)
Share Price: $5.33
Founded by real estate guru Eric Wu, Opendoor (NASDAQ: OPEN) offers a technology-driven, convenient, and streamlined process to buy and sell homes.
Why Should You Dump OPEN?
- Number of homes sold has disappointed over the past two years, indicating weak demand for its offerings
- Projected 27.5 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
Opendoor is trading at $5.33 per share, or 1.2x forward price-to-sales. Read our free research report to see why you should think twice about including OPEN in your portfolio.
Optimum Communications (OPTU)
Share Price: $1.59
Based in Long Island City, Optimum Communications (NYSE: OPTU) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Why Should You Sell OPTU?
- Sluggish trends in its broadband subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- 8× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Optimum Communications’s stock price of $1.59 implies a valuation ratio of 7.8x forward EV-to-EBITDA. If you’re considering OPTU for your portfolio, see our FREE research report to learn more.
SoundHound AI (SOUN)
Share Price: $7.97
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ: SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Does SOUN Fall Short?
- Gross margin of 42.4% reflects its high servicing costs
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Negative free cash flow raises questions about the return timeline for its investments
At $7.97 per share, SoundHound AI trades at 14.1x forward price-to-sales. To fully understand why you should be careful with SOUN, check out our full research report (it’s free).
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