Undervalued dividend stocks remain a top investment choice for investors globally. Generally, value stocks trade at a discount and are positioned to deliver outsized gains when market sentiment improves. And if that undervalued stock offers a dividend, investors can also collect returns from this additional income stream.
To find the best opportunities, it's essential to identify companies that are part of rapidly expanding addressable markets, allowing them to increase dividends and enhancing the effective yield over time. Here's a look at one such dividend stock that trades under $10 you can consider buying right now.
What's the Upside Potential for Immersion Stock?
Valued at $206 million by market cap, Immersion Corp (IMMR) is a metaverse stock that creates, designs, develops, and licenses technologies that allow people to engage with various digital products. It provides technology, patents, and combined licenses in addition to software development kits (SDKs). Immersion serves verticals such as mobile communications, wearables, consumer electronics, automotive, gaming, and virtual reality. Its portfolio of solutions aims to facilitate the creation of haptic experiences. It offers licenses to patented technologies to customers that can deployed easily on haptically enabled devices.
Immersion and its subsidiaries ended 2022 with more than 1,200 issued or pending patents. Immersion believes its technology and solutions can be used to accelerate the deployment of metaverse products, which will be a key driver of its top-line growth in the upcoming decade.
According to a report from Precedence Research, the global metaverse market is forecast to expand by 44.5% annually from $68.5 billion in 2022 to $1.3 trillion in 2030, providing Immersion with enough room to grow its sales.
On the charts, IMMR has gained 25% over the past 52 weeks, roughly in line with the Nasdaq-100 Index ($IUXX). However, the shares have pulled back more recently, and are now off 6% on a year-to-date basis to trade around $6.35 - lagging the broader market, and presenting a potential dip-buying opportunity.
Inside Immersion's Earnings Results
Immersion has increased its revenue from $30.4 million in 2020 to $38.4 million in 2022. Due to its asset-light business model, the company enjoys gross margins of over 95%, and increased operating income from $2.2 million in 2020 to $24.4 million in 2022.
In the June quarter, Immersion reported revenue of $7 million and adjusted earnings of $9.1 million, or $0.28 per share. In the year-ago period, it reported sales of $8 million, along with a loss of $1.1 million, or $0.03 per share.
Due to its improving bottom line, Immersion could repurchase shares and pay shareholders dividends in the June quarter. It currently offers shareholders an annual dividend of $0.22 per share, indicating a forward dividend yield of 1.9%.
In Q2 of 2023, Immersion renewed a multi-year license agreement with Marelli, which manufactures and develops automotive solutions. It signed a similar patent license agreement with Sensel, which manufactures and develops trackpad solutions.
Immersion continues to pursue patent infringement lawsuits against tech giants such as Meta (META), Valve, and Xiaomi as it remains focused on renewing key license agreements, resulting in stable cash flows across market cycles.
What's the Target Price for IMMR?
Just one Wall Street analyst covers IMMR currently. That analyst has a moderate buy rating on the stock, with an average target price of $11 - indicating an upside potential of about 73% from current levels.
Sales of $30 million are expected for IMMR in 2024, while adjusted earnings are forecast to expand to $1.35 per share. So, IMMR is priced at 4.75x forward earnings, which is very cheap.
