Investing in low-dollar stocks can be alluring due to their affordability. However, investors should never base their investment decisions solely on the share price of a stock, as there may be valid reasons why a particular name is trading at such cheap levels.
Nonetheless, it's important to note that not all low-dollar stocks are unworthy investments. There are numerous top-tier stocks available at lower price points that carry significant growth potential.
Take, for instance, companies such as SoFi (SOFI), Carnival (CCL), and SoundHound (SOUN). These companies have good growth prospects and present attractive opportunities for investors with a higher risk tolerance and a long-term investment horizon.
Further, it's possible to buy these three stocks for $50. Let's explore why these stocks look like compelling choices for long-term investments.
SoFi Technologies
SoFi is a fintech firm providing various financial services, including personal loans, home loans, student loans, and credit cards. Additionally, it offers technology-based products and solutions.
Notably, in 2022, SoFi transformed into a bank holding company through a merger, and subsequently started operating SoFi Bank, offering Checking and Savings accounts.
SoFi stock has gained about 82% year-to-date as it continues to deliver record revenues and adjusted EBITDA. The company’s CEO, Anthony Noto, highlighted during the most recent conference call that Q2 marked its “ninth consecutive quarter of record revenue and fourth consecutive quarter of record adjusted EBITDA.”
One of the key drivers of SoFi's robust growth is the increased loan origination in its personal loan business. Furthermore, the home loan segment’s originations tripled quarter-over-quarter in Q2. The technology business is also experiencing rapid growth, contributing significantly to the company's overall success.
A standout factor is SoFi's effective utilization of its bank license, which is driving it toward profitability. The company is steadily expanding its high-quality deposit base, which supports its net interest margin and reduces its funding costs.
Looking ahead, SoFi is well-positioned to benefit from continued momentum in its personal and home loan segments, and the strength of its tech business also bodes well for future growth. Additionally, the anticipated recovery in student loan refinancing volumes supports my bullish outlook. Moreover, the company's increased loan capacity, growing deposit base, and significant improvement in unit economics all position it favorably to achieve sustainable profitability in the coming years.
However, near-term pressure on its business from a higher interest rate environment is keeping some analysts from endorsing the stock. Out of the 16 analysts covering SOFI, five have a “strong buy” recommendation, seven analysts recommend a “Hold,” one has a “Moderate Sell,” and three maintain a “Strong Sell” recommendation. The average price target for SoFi stock is $10.11, which implies nearly 20% growth potential from current levels.
Carnival Corporation
Carnival Corporation is a leading global cruise company, ranking among the premier leisure travel enterprises with its portfolio of world-class cruise lines. Its stock has gained more than 61% year-to-date, reflecting strong consumer demand across its segments.
The company recently delivered third-quarter results, wherein its top line hit an all-time high of $6.9 billion. Plus, booking volumes during the quarter were nearly 20% higher than pre-pandemic levels in 2019.
What stands out is that Carnival is seeing no signs of a slowdown, and management expects the momentum to sustain in 2024. For instance, Carnival’s cumulative advanced booked position for 2024 is well above the high end of the historical range, and at higher prices than 2023 levels. This bodes well for its revenue and earnings. And while Carnival has increased its capacity, it has fewer inventories to sell, which implies it is well-positioned to drive pricing higher and deliver strong yields in 2024.
Overall, stellar demand, high occupancy rates, solid bookings, and higher prices will enable the company to deliver robust financial numbers in the coming quarters, supporting its stock price. However, higher fuel prices remain a short-term drag.
Out of the 16 analysts covering Carnival stock, 11 have a “strong buy” recommendation, one analyst recommends a “Moderate Buy,” three analysts suggest a "Hold,” and one has a “Strong Sell.” The average price target for CCL is $18.13, which implies nearly 40% upside potential from current levels.
SoundHound
SoundHound is an exciting play in the Artificial intelligence (AI) space. It is a leading conversational intelligence company offering voice AI solutions. SoundHound’s voice AI powers millions of cars, televisions, apps, and IoT (Internet of Things) devices.
SoundHound is rapidly diversifying its product range with the recent introduction of SoundHound Chat AI tailored for the automotive industry. Additionally, it has unveiled a user-friendly, out-of-the-box AI customer service solution called Smart Answering. These strategic moves have positioned the company favorably to seize a substantial share of the conversational AI market.
It’s worth highlighting that the company’s customer base is growing in the automotive segment, which will likely accelerate its growth. Some of its top customers include Hyundai and Stellantis. Moreover, its Smart Ordering and Smart Answering solutions are poised to enhance its presence in customer service and food ordering domains.
Overall, SoundHound will benefit from the strong adoption of AI and its innovative offerings, while increasing auto and IoT units and higher prices are driving product royalties. Further, it has a growing backlog, which will support future revenue growth.
SOUN has five “Strong Buy” recommendations from analysts, and the average price target of $5.04 implies 153% upside potential from current levels.
