The recent stock market volatility has left many great companies trading at bargain prices. As a value investor, I get excited when I see quality stocks dipping below $10 per share. While risky, these cheap stocks offer high-upside potential if selected carefully.
Following the huge market sell-off over the past two years, there are still plenty of solid businesses whose share prices remain depressed. The ongoing rally has centered on hot themes like AI, ignoring great value opportunities hiding in plain sight.
In my view, snapping up a few smart stocks under $10 right now presents a great chance to generate enormous returns. Before these underappreciated companies come back into the spotlight, investors should consider buying shares while they remain remarkably cheap.
Peloton Interactive (PTON)
Peloton (NASDAQ:PTON) is a connected fitness company that still has tremendous upside potential despite its massive 96% decline from its peak. The stock currently trades around $6 per share, but I see massive value here for patient investors.
Peloton skyrocketed in popularity during the pandemic as people flocked to its interactive exercise bikes and treadmills. However, growth has stalled more recently amidst reopening headwinds and demand normalization. Revenue actually declined 5.4% year-over-year last quarter, missing expectations by $155,000.
Accordingly, near-term sentiment has turned quite bearish on Peloton. However, looking ahead, there are reasons for optimism. Analysts expect sales and earnings growth to regain momentum. Consensus estimates call for 8% revenue growth next fiscal year, accelerating to 10.2% growth in 2025 (company fiscal year 2026). Meanwhile, earnings per share are forecast to jump 38.2% this year. Not too shabby!
Critically, Peloton’s new CEO, Barry McCarthy, is aggressively right-sizing the business after excessive pandemic-era investments. The company is slashing costs and improving its free cash flow generation.
Peloton is also extending its ecosystem with new products like its rowing machine while boosting engagement through personalized content recommendations. Management sees a path to positive free cash flow by the second half of 2024.
In my view, PTON stock below $10 offers a rare opportunity to buy a leading connected fitness platform on the cheap. The company still boasts a loyal community of over 5.9 million members. While bumps in the road exist, Peloton’s fortunes should improve over time. I believe the stock has a substantial upside from current levels. Currently, analysts seem quite split on this stock. However, I think that’s normal, considering the company is returning to a more sustainable growth trajectory after the pandemic.
HelloFresh (HELFY)
Turning to meal kit company HelloFresh (OTCMKTS:HELFY), this stock also looks ripe for a rebound after its prolonged sell-off. While the company’s revenue growth did turn negative last quarter (falling 2%), analysts see a return to expansion next year.
Consensus forecasts call for 5.6% revenue growth this year, accelerating to 11.5% in 2024. The stock currently trades at a bargain 0.6-times forward sales.
Right now, management is tightening costs and pushing select marketing budgets to more profitable growth periods. HelloFresh is also continuing to roll out new initiatives like its prepared meal brand Factor.
While HelloFresh faces near-term consumer spending headwinds, its long-term outlook remains compelling. The global meal kit industry is still in its infancy at around $17 billion, and is expected to hit $55.4 billion by 2032. HelloFresh is the dominant player here. Once macro conditions improve, this opportunistic stock should deliver tasty returns. The average analyst sees 85% upside potential for HELFY stock over the next year.
Full Truck Alliance (YMM)
Shifting to China, digital freight platform Full Truck Alliance (NYSE:YMM) looks absurdly cheap after falling over 60% from its 2021 IPO price. However, the company’s financial performance remains rock-solid.
In its most recent quarter, revenue grew 16.4%, and earnings per share beat analyst estimates by 45%. Analysts now forecast 78% earnings per share growth this year, while this number is expected to double to 57 cents by the end of 2025.
Importantly, the company continues gaining share in China’s massive $1.1 trillion freight market, which is largely untapped. Full Truck Alliance’s fulfilled orders expanded 44.5% last quarter to 40.2 million orders.
While China’s economy faces challenges, its GDP still grew a respectable 6.3% last quarter after government stimulus efforts. Full Truck Alliance seems poised to survive any downturn.
Trading at just 12-times 2025 earnings estimates, Full Truck Alliance offers tremendous upside. Its digitization of the freight industry should unlock tremendous efficiencies and growth runways. The company’s one-year upside potential here is a respectable 40%, according to the average analyst.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
