Diving into low-dollar stocks can be tempting, primarily because they are affordable. However, investors shouldn't let the share price alone dictate their investment decisions, because a stock’s rock-bottom price could stem from valid reasons.
But that doesn't mean that investors have to dismiss low-dollar stocks outright. Among the ranks of stocks under $10 are some gems with substantial growth potential, including names like Payoneer Global (PAYO), SoFi Technologies (SOFI), and SoundHound AI (SOUN). Despite trading under $10, these companies exhibit promising prospects, making them worthy of investors’ attention for long-term investments.
Let's dig deeper to understand why these under-$10 stocks are promising options for the long haul.
#1: Payoneer Global Stock
Payoneer Global (PAYO) is a financial technology company focused on small and medium-sized businesses (SMBs) in emerging markets. Its platform enables SMBs to receive, manage, and make payments in multiple currencies. The company also offers working capital and mass payout services.
The fintech company is well-positioned to tap into secular trends, like the structural shift toward digital commerce platforms. Moreover, it offers exposure to high-growth avenues such as cross-border payments, e-commerce, B2B transactions, and emerging markets. The company stands to benefit from a large addressable market and product expansion. Further, Payoneer is focusing on acquiring larger ICPs and improving pricing, which is driving its average revenue per user (ARPU).
Payoneer started 2024 on a strong note, and grew its base of customers who fit its ideal customer profile (ICPs) by 8% in Q1. What stands out is that it is witnessing even faster growth among larger ICPs and those in regions with higher take rates. Payoneer recorded a remarkable 21% surge in transaction volume, marking its highest growth rate in nearly three years in Q1. Moreover, it registered strong growth across every channel.
In summary, the company is generating solid growth across the entire platform and significant profitability. Thanks to these attributes, Wall Street is largely bullish about its prospects.
Seven out of nine analysts have a “Strong Buy” rating on PAYO stock, and two recommend a “Moderate Buy.”
The consensus target price of $6.69 reflects a potential 14% increase from its current trading price.
#2: SoFi Technologies Stock
SoFi Technologies (SOFI) shares have dipped amid prolonged high interest rates, industry-wide liquidity concerns, and macroeconomic uncertainty. Despite this, the company's business momentum remains strong, offering a compelling buying opportunity.
The recently concluded Q1 performance marks a significant achievement, with SoFi registering over 25% growth in revenue for the 12th consecutive quarter. Concurrently, the company recorded a stellar 91% increase in adjusted EBITDA, with strong performance across all business segments.
SoFi’s total deposits grew by a record $3 billion, up 16% during the first quarter to $21.6 billion. Impressively, 90% of its consumer deposits originate from sticky direct deposit members. This growth in high-quality deposits drives the lower cost of funding for its loans and increases the company’s flexibility to capture additional net interest margin (NIM) and optimize returns.
SoFi's Lending business remains strong, driven by solid net interest income, which was up 71% year-over-year in Q1. Moreover, net interest income improved to 5.91% compared to 5.48% in the prior year quarter. Furthermore, the company’s Financial Services and Technology Platform segments are growing well, and now account for 42% of adjusted net revenue, which is positive as it diversifies its revenue streams.
In summary, SoFi’s diversified revenue streams, high-quality deposits, focus on maintaining solid credit quality, strengthening its balance sheet and capital ratios, and momentum in the Technology Platform and Financial Services businesses bode well for growth. However, high interest rates and macro uncertainty keep some Wall Street analysts from endorsing it.
Among the 18 analysts covering SoFi stock, five have a “Strong Buy” recommendation, one recommends “Moderate Buy,” nine analysts have a “Hold,” and three suggest “Strong Sell.”
The average price target for SoFi stock is $9.09, which suggests a potential upside of about 31% from current levels.
#3: SoundHound AI Stock
SoundHound AI (SOUN) is a compelling investment in the artificial intelligence (AI) industry. Specializing in voice AI, its target market spans across restaurants, automobiles, televisions, and Internet of Things (IoT) devices. The surge in demand for voice AI has propelled SoundHound’s revenue to triple within just two years. Moreover, the company is effectively managing its expenses, bolstering its cash position.
During the recently reported Q1, SoundHound’s top line increased 73% year-over-year. At the same time, the company registered an 80% jump in its cumulative subscriptions and booking backlog. The company’s leadership expects the momentum to continue, and raised the full-year revenue forecast to $65-$77 million, up from $63-$77 million.
Of significant note is SoundHound’s strategic acquisition of SYNQ3 in Q1, solidifying its position as the foremost voice AI provider for restaurants. Moreover, its solutions are gaining traction in the customer service segment, particularly among leading quick-service restaurants.
SoundHound is experiencing a notable increase in royalties in the automotive sector, driven by rising volumes. Both auto units and cloud users have marked strong double-digit growth. Additionally, the company is witnessing a surge in demand for generative AI solutions, with promising opportunities emerging from unit price expansion. Notably, SoundHound entered into a multiyear commitment in the TVs and devices category, driving stellar growth in device sales.
The company is well-positioned to capitalize on the escalating demand for voice AI technologies. Its expanding user base and growing foothold in off-premise dining, alongside a vast addressable market, bode well for sustained growth and success.
However, SOUN stock has more than doubled this year, prompting valuation concerns for some analysts. Among the six analysts covering SOUN stock, four have a “Strong Buy” recommendation, and two analysts recommend a “Hold.”
The average price target for SOUN stock is $7.15, which suggests a potential upside of about 40% from current levels.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
