While a lot of stocks are expensive, many were beaten down this spring and look very affordable as we head into summer. The rotation out of technology growth stocks, dubbed the “tech wreck on Wall Street,” and market volatility have pushed down the share price of many well-performing stocks, presenting some great cheap stocks to buy for savvy investors.
For $50 a share or less, investors can add several stocks to their portfolios that have a lot of potential for long-term gains. As the economy picks up in the second half of the year, many stocks can be expected to outperform. In this article, we’ll examine four stocks with great buying opportunities in June that could provide future profits.
My four top picks are:
Best Cheap Stocks to Buy: Carparts.com (PRTS)
Carparts.com is a beaten down stock with huge upside potential. The Torrance, California-based company specializes in selling all types of automotive parts, including parts for engines, online. In business since 1995 and formerly known as “U.S. Auto Parts,” Carparts.com sells millions of parts and accessories each year.
At about $17 a share, PRTS stock is down almost 30% from its 52-week high of $23.26. Despite the decline, analysts remain keen on the stock with a median price target of $24.50, suggesting the share price could rise more than 40% higher from current levels.
PRTS stock was hurt by the general rotation out of tech plays and into cyclical securities. However, the company’s fundamentals and financial performance justify a higher share price. Carparts.com reported revenues of $144.8 million in their first-quarter earnings, up 65% from a year earlier and far ahead of the $117.5 million expected by analysts. The company’s distribution center in Texas is about 60% full and growing, with plans to increase its total capacity to one million square feet.
The future remains bright for the used car market and the parts needed to sustain it. According to J.D. Power, used car prices are up nearly 17% since the start of 2021. The global pandemic has Americans buying used rather than new cars as they travel and commute less often, a trend that could continue after Covid-19 is behind us.
Draftkings (DKNG)
Another stock that looks cheap at its current share price is Draftkings, the Boston-based online sports betting and fantasy sports company. DKNG stock closed at $50.99 on June 2, putting it 31% below its 52-week high of $74.38.
At its current level, DKNG stock is well below where analysts expect it to be. Analysts have set its median price target at $74 a share. The high target on the share price is $105. The median price target would represent a gain of more than 40% from where the stock currently trades.
DKNG stock is expected to take off in this year’s second half as sports resume. With the upcoming NFL football season and a growing number of U.S. states legalizing sports betting, Draftkings can generate revenue and cover budget shortfalls coming out of the Covid-19 pandemic.
The company continues to perform well financially. Draftkings posted revenues of $312 million in its first-quarter earnings. That’s nearly 35% better than analyst estimates of $231.5 million and shows 175% year-over-year growth.
Best Cheap Stocks to Buy in June: Sunrun (RUN)
Sunrun, a San Francisco-based residential solar panel and home battery company, has received one analyst upgrade after another in recent months. Goldman Sachs calls Sunrun a “bellwether” solar company and raised its rating on the company to “buy” from “neutral” with a price target of $70 per share.
At its current share price of $42.87, RUN stock is over 50% lower than its 52-week high of $100.93 and looking mighty cheap. The stock’s decline was mostly due to supply issues that the company has since resolved.
While Sunrun remains unprofitable, it reported a narrower Q1 loss and has raised its full year guidance for 2021. The company reported a net loss of $23.8 million, a marked improvement from a year earlier loss of $28 million. First-quarter revenue totaled $334.8 million, up 59% from a year ago. Sunrun increased its guidance to range between 25% to 30% for the full-year, up from earlier expectations of 20% to 25% growth.
The median price target on RUN stock is currently $81, which implies that the share price could rise more than 80% from where it is now. The low estimate on the stock is $50, which is over 15% higher than the current share price.
Nautilus (NLS)
At under $20 a share, Nautilus’s stock looks extremely cheap — even cheaper when compared to rival Peloton (NASDAQ:PTON), whose share price is over $100. At its current price of $17.52 per share, the fitness equipment maker’s stock is 44% below its 52-week high of $31.38.
Analysts seems to agree that shares of the Vancouver, Washington-based company are undervalued at current levels. The median price target on the stock is $26, implying a 48% upside from here. The high target on the stock is $40.
As with the other stocks featured in this article, Nautilus reported much stronger first-quarter earnings than expected. The company, which owns brands like Bowflex and Schwinn Fitness, reported revenue of $206.1 million in this year’s first quarter, up 120% from revenue of $93.7 million in the same period of 2020. Earnings per share (EPS) for the first quarter came in at 93 cents, up an amazing 1,229% from an EPS of 7 cents in the first quarter of 2020. The earnings results definitely support a higher share price.
On the date of publication, Joel Baglole held a long position in DKNG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
