Stocks under $10 tend to fall within one of three camps: a small-cap value play unlikely to expand much further, a pre-revenue or unprofitable company set to explode in the future or a small-cap stock either on the decline from past highs or destined for the dustbin. That’s why picking solid stocks under $10 is a tricky proposition.
These three stocks blend the best-in-class attributes to offer value, growth and massive potential upside with just a little luck. While they may remain flat or stagnant in the short term, each has massive tailwinds brewing that promise to propel them to new heights — maybe even into triple-digit territory.
Rocket Lab USA (RKLB)
Rocket Lab USA (NASDAQ:RKLB) is one of those stocks under $10 that doesn’t just have triple-digit upside potential. Instead, it stands ready to capitalize on a long-term trend worth $1 trillion or more: space. RKLB burst into the collective consciousness last year after a record-setting number of launches. This year, RKLB is cementing its position among stocks under $10 after a $500+ million government contract — and a surprisingly strong earnings report this week.
The company’s launch and contract backlog, or “orders” from clients, sits at a sizable $1 billion. While not guaranteed, as customers can cancel orders, the backlog offers a ballpark estimate for future revenue. The company’s Q4 revenue hit $60 million, so a backlog of that magnitude represents significant growth moving forward. True to form, RKLB’s management estimates Q1’s revenue will continue climbing to within the $92 to $98 million range.
Since RKLB is still firmly within its expansionary phase (and you can’t pay bills with a backlog), expect the company to continue raising cash. That will likely come in the form of equity or convertible debt, as we saw earlier this month. While it dilutes shareholder value in the short-term, the company’s using cash to expand its opportunities and, practically speaking, dilution represents a way to rapidly consolidate more shares before the under $10 stock goes stratospheric.
AST SpaceMobile (ASTS)
Speaking of space stocks under $10, AST SpaceMobile (NASDAQ:ASTS) is a pre-revenue low-earth satellite provider ready to change how we connect. Unlike data-first operators like SpaceX, the company leverages its growing satellite constellation to bring standard cell service worldwide. Last year saw the first successful cell-to-cell call facilitated by ASTS satellites, and the company planned the first of many commercial launches for later this year. Running cable and erecting cell towers in some remote locales isn’t practical, so ASTS stands ready to serve communities that other providers don’t see as worth pursuing.
Of course, like RKLB, ASTS needs cash to keep the lights on and launch satellites. To that end, the company secured strategic funding last month and, in a surprise development, included Google (NASDAQ:GOOG, NASDAQ:GOOGL) among major backers. Strategic funding gave per-share pricing a decent pop, but it was short-lived. Soon after, the company announced a dilutive share offering. But, like RKLB, the temporary dip downward represents a consolidation and accumulation period before the under $10 stock turns into a triple-digit juggernaut.
Lithium Americas (LAAC)
Lithium Americas (NYSE:LAAC) is a stock under $10 that’s been beaten down by sluggish lithium markets. But the trend could easily reverse in 2024. That, in turn, could cause the Argentinian-centric mining stock to skyrocket. Global lithium demand (not just electric vehicle-centric, either) should grow over 30% annually through 2030. Despite the upside, most lithium producers struggled in 2023 as sluggish demand met significant oversupply to drive spot prices down. But demand is accelerating rapidly, and some project vast undersupply in as little as a year. That, of course, will push spot pricing higher to LAAC’s benefit.
As one investment analyst said, “Lithium and critical minerals are, in the 21st century, what coal was in the 19th century and what oil was in the 20th century.” LAAC is an under $10 set to capture the growing energy segment. Trading well below book value and at lower price-to-forward earnings than it has in years, LAAC is simultaneously a solid value stock play and one with tremendous growth potential.
On the date of publication, Jeremy Flint held no positions (directly or indirectly) in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
