In the stock market, identifying promising investments is both an art and a science. Three breakout stocks under $20 are emerging as potential game-changers in this dynamic environment. These companies, operating in information technology, financials, and communication services, are not only trading at an accessible price but also demonstrating the potential to double investors’ money by 2026.
The first one on the list, fueled by its AIP, is experiencing rapid growth with a threefold increase in users and a strategic move into government web services. The second one’s focus on expanding financial services and innovative solutions positions it as a market leader, while the third one, with a solid financial standing and strategic diversification, sets the stage for robust organic growth.
Read more to delve into the key strategies and financial strengths that make these stocks promising candidates for substantial returns.
Palantir (PLTR)
For Palantir (NYSE:PLTR), Apollo Intelligence Platform’s (AIP) contribution to Palantir’s growth is a critical fundamental. The potential market for AIP is massive, with the number of AIP users almost tripling in Q3 2023 alone. Also, the launch of Palantir Government Web Services further extends the impact of AIP by supporting and growing the defense tech ecosystem.
Additionally, there was an almost threefold increase in AIP users and engagement from nearly 300 distinct organizations within five months of launch. This suggests the rapid adoption and positive reception of AIP on the market. Boot camps, a key component of Palantir’s go-to-market strategy for AIP, are driving substantial improvements in unit economics. For instance, there is a shift from traditional pilots taking one to three months to AIP boot camps delivering results in five days or less.
Palantir’s top-line is a strong indicator of its value potential. Revenue growth reaccelerated to $558 million in Q3, marking a 17% year-over-year increase and a 5% sequential increase. Excluding the impact of revenue from strategic commercial contracts, revenue grew even more substantially, at 21% year-over-year and 6% sequentially.
Furthermore, Palantir’s focus on its foundational principles of counterterrorism is reflected in its impact on U.S. government business. The expectation of a reacceleration beyond the current growth rate of 10% year-over-year is supported by increasing demand for Palantir’s products to support global allies. Recently, the Army awarded a contract worth up to $250 million over three years. Hence, this signifies continued platform preference and collaboration with government entities.
Finally, there is a solid engagement with COCOMs, armed services, the intelligence community and special forces for testing, utilizing and scaling AI capabilities. Therefore, this supports a robust strategic dimension to Palantir’s government business.
StoneCo (STNE)
To begin with, StoneCo (NASDAQ:STNE) targets expanding its financial services business. The Micro, Small and Medium Enterprise (MSMB) total payment volume (TPV) has consistently grown at an impressive pace, increasing by 20% year-over-year, more than twice the industry rate. This growth indicates StoneCo’s market leadership and competitive advantage in payment solutions.
The MSMB client base also witnessed a substantial 42% year-over-year increase, reaching almost 3.3 million merchants. The MSMB take rate increased by 0.28% year-over-year to 2.49%, demonstrating the company’s ability to monetize its services effectively. Expanding banking and credit solutions further reinforces StoneCo’s commitment to diversifying its financial services portfolio.
Furthermore, the banking active client base surged to 1.9 million, accompanied by R$4.5 billion in deposits. This growth underscores the success of StoneCo’s strategy in developing its platform and engaging clients with innovative solutions. The credit portfolio expanded to R$113 million in the quarter, suggesting the company’s proactive approach to offering diverse financial products.
Moreover, StoneCo’s other priority focuses on evolving its software business. The company has consistently improved its results, with software revenues reaching R$388 million. The adjusted EBITDA for the software segment exhibited significant growth, reaching R$79 million with a margin of 20.5%. Hence, this solid bottom-line edge is attributed to StoneCo’s continuous efforts to enhance the organization’s operational leverage and integration plans.
Overall, the focus on increasing efficiency can be observed in the margin improvement. This fundamental strength of StoneCo’s financial and software businesses may lead to solid value growth.
SurgePays (SURG)
SurgePays (NASDAQ:SURG) has consistently shown a positive profitability trend. The company attained its highest-ever net income of $7.1 million in Q3 2023. The company’s EBITDA of $7.5 million and year-to-date net income exceeding $17 million indicate solid financial standing. With a cash balance exceeding $12 million and minimal debt, SurgePays has established the capability to pursue growth aggressively.
Additionally, the company strategically focuses on its core model by streamlining operations and discontinuing the legacy mass tort lead generation company, LogicsIQ. Despite LogicsIQ contributing $4.1 million to top-line sales in 2022, SurgePays decided to align its business messaging and financials with its core model, targeting institutional stakeholders. Also, it supports the company’s goal of transitioning from a micro-cap to a small-cap.
Furthermore, SurgePays progressively diversifies its revenue sources, with revenue from the Affordable Connectivity Programme (ACP) increasing by 12% to $30.7 million in Q3 2023. The company’s gross profit experienced a substantial 446% increase, reaching $10.5 million. Moreover, despite a decrease of $2.1 million in revenue due to winding down LogicsIQ, the core business of wireless and fintech grew by $2 million in Q3. The company’s emphasis on store-based subscriber growth contributes to its record-breaking net income of $7.1 million. Hence, this suggests top-line diversification and improved operational efficiency that may continue to support strong organic growth.
Finally, SurgePays positions itself for growth by leveraging its financial strength and profitability. Also, the company’s goal of moving from a micro-cap to a small-cap suggests a long-term vision and a focus on growth. Critically, SurgePays focuses on mergers and acquisitions by controlling the distribution platform and demonstrating strategic expansion plans to boost the value potential.
As of this writing, Yiannis Zourmpanos held a long position in PLTR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
