We all know the frustration of seeing certain stocks fail to deliver satisfactory results in today’s market environment. That has been the case with many stocks that aren’t SaaS/AI. However, I see an opportunity for us to buy up shares of these under-the-radar under-$10 stocks before they climb higher. Investor focus right now is solidly on the Magnificent Seven mega-cap stocks. It has been for well over a year now. I believe these stocks are reaching stretched valuations and moving away from fundamentals.
Index investing is very popular, and the bigger the market capitalization, the bigger the representation in the S&P 500. That could eventually form a bubble — not that we’re close to bubble territory yet.
Regardless, you should still take a breather and diversify into up-and-coming companies with impressive growth and no major profitability concerns. They can deliver outstanding returns once they get their time in the sun after the mega-caps stop hogging all the attention. Here are the under-$10 stocks that could be worth $100 by 2026:
Under-$10 Stocks: Flux Power (FLUX)
Renewable energy stocks like Flux Power (NASDAQ:FLUX) have faced severe headwinds over the past year, with the sector declining substantially since conflicts began escalating in February 2022. This turmoil prompted a renewed focus on oil as the U.S. scrambled to ramp up production and the E.U. scrambled to import more energy from the U.S. and the Middle East. While understandable in the short term, I believe this was the wrong long-term reaction by Mr. Market. In fact, European countries moving away from Russian energy can only benefit renewable energy companies and related industries like electric vehicles (EVs) over the next decade.
In the near term, rate hikes and an economic slowdown have no doubt hurt demand, causing customers to pull back on major purchases. But with rates expected to decline over the coming months, we could see a resurgence in EV sales and battery-related manufacturers like Flux Power post a strong recovery.
As a lithium-ion battery manufacturer serving the EV and aerospace industries, Flux Power stands to benefit as lending rates fall, spurring renewed growth. Analysts forecast the company’s EPS skyrocketing from a loss of 27 cents in FY2024 to earnings of 53 cents in FY2026. Trading at just 8x the estimated 2026 EPS, the current valuation leaves substantial upside. Looking even further out, analysts predict EPS could reach $5 in FY2033. At barely over 1x forward sales and with revenue growth projected at 25% annually this decade, this is a long-term growth story trading at a fraction of potential value.
Eventbrite (EB)
Eventbrite (NYSE:EB) has struggled to regain its footing coming out of the pandemic. As a ticketing and event management platform, Eventbrite was already in decline for several years heading into 2020. The arrival of COVID-19 and social distancing felt like the final nail in the coffin. With Eventbrite shares now sitting 76% below their January 2020 highs, it’s easy to write off this stock as down for the count. But I believe with patience and a long-term outlook, Eventbrite could still deliver sizable returns from current levels.
No doubt, revenue growth will remain muted in the near term. But analysts expect the top line to pick up from $367 million in 2024 to almost $500 million by 2027. And while margins could compress over the next few years, EPS is forecasted to rebound sharply within the next decade. Specifically, analysts predict EPS climbing to 63 cents in 2027 and surpassing $1 by 2029. Therefore, at just 1.5x market cap, the current $5.30 share price looks inexpensive if the company can achieve this level of growth. Compared to many software firms trading at far richer valuations with weaker growth outlooks, this is a valuation disconnect that could snap back violently to the upside over an investment time horizon of 5 to 10 years. The growth outlook makes it one of the best under-$10 stocks you can buy.
LexinFintech (LX)
Many investors shy away from Chinese stocks these days, but that’s exactly why I think names like LexinFintech (NASDAQ:LX) are undervalued. While I’ve avoided many Chinese companies in the past, Beijing’s latest economic stimulus actions, including rate cuts, convince me that certain Chinese tech stocks are primed for a comeback. Among the most discounted names are tech companies like LexinFintech, which trades below 2x forward earnings and just 0.2x sales, even as EPS is slated to climb 50% between 2023 and 2025 alongside revenue growth from $1.76 billion to over $2.15 billion.
With $917 million in debt against $346 million in cash, some argue LexinFintech’s balance sheet is a risk. However, as Chinese rates fall, servicing this debt will become far more manageable. Additionally, lower rates should stimulate demand for lending, providing a volume catalyst for fintechs like Lexin.
Black Rifle Coffee Company (BRCC)
Black Rifle Coffee (NYSE:BRCC) recently posted disappointing Q4 results, with the stock sliding even lower in response. Down over 74% in the past 5 years, BRCC could face additional near-term pressure after reporting EPS of -7 cents, below the -1 cent consensus estimate. Revenue of $119.65 million also missed analyst expectations for $123.75 million by 3.31%.
Despite the rocky backdrop, I believe BRCC has upside potential over a long-term investment horizon. While the coffee business may be underwhelming currently, the company continues expanding revenue at a solid clip. Analysts forecast sales to reach $1.4 billion in 2028. Even assuming BRCC dramatically misses and hits just $1 billion in revenue, the stock would still trade at a mere 0.2x sales, compared to 0.5x currently.
With Wall Street laser-focused on profitability, BRCC’s robust top-line growth has gone unrewarded. But I expect that to change eventually. Customer acquisition and retention appear strong, positioning the company to generate profits with relative ease down the road. In fact, BRCC issued 2024 guidance for adjusted EBITDA of $27 to $40 million with approximately 80% free cash flow conversion of adjusted EBITDA. That marks a sizable improvement from Q4 2024 adjusted EBITDA of $12.1 million and a net loss of $14 million. It is definitely one of the top under-$10 stocks to buy.
Baozun (BZUN)
Baozun (NASDAQ:BZUN) is an e-commerce services provider in China. BZUN has cratered 93% over the past 5 years. But after bottoming around $2, the stock has rebounded 25% since January, potentially signaling an end to the bleeding. No doubt BZUN remains a speculative bet with downside risk in the near term. However, Baozun is projected to return to profitability in 2024, and then double earnings in 2025. With the stock at just 3x the estimated 2025 EPS, the current valuation looks cheap. At 0.12x forward sales amid mid-single-digit growth, this is a disconnect that could spark a powerful recovery rally.
BZUN’s newly announced $20 million share repurchase plan seems to have halted the decline. Once profits accelerate, I believe the stock has substantial room to run higher. Moreover, potential stimulus measures and rate cuts in China would provide an additional catalyst. Note that Baozun generated positive cash flow in Q3 2023 for the first time since its 2015 IPO, underscoring its improving financial footing.
Sealsq (LAES)
Sealsq (NASDAQ:LAES) is a cybersecurity and AI firm operating in red-hot sectors where valuations have exploded. With many cybersecurity and semiconductor stocks trading at 10 to 20x sales or higher, penny stock LAES could deliver outsized returns once discovered by Wall Street. Already up 63% in 2024, further upside could be in store. At just 1x forward sales, LAES looks significantly undervalued compared to peers.
With exposure to quantum computing and the Internet of Things, LAES participates in several potential mega-trends. While the recent launch of its own cryptocurrency Sealcoin seems an unnecessary distraction, I generally applaud companies pivoting to chase new opportunities. After all, shareholders stand to benefit from management’s hunger for growth. It may no longer be one of the under-$10 stocks in a few quarters if the stars align.
Bit Digital (BTBT)
Speaking of crypto, Bitcoin (BTC-USD) mining stocks have lagged far behind the surge in Bitcoin itself recently. But I expect that divergence to narrow once the next halving occurs, sending the crypto higher and ballooning mining companies’ balance sheets. Bit Digital (NASDAQ:BTBT) could see huge gains this cycle as it expands its fleet.
In my view, it makes little sense for mining stocks to trade sideways while Bitcoin goes parabolic. It’s only a matter of time before names like BTBT receive their due rewards. Of course, valuing crypto miners requires guesswork given the commodity-like nature of Bitcoin. Still, with billions flowing into Bitcoin ETFs, I expect BTBT substantially higher as cryptocurrency gains mainstream adoption.
BTBT’s 45,000 miners can currently produce a hash rate of 3.7 EH/s, having mined 6,342 BTC to date. As of February 2024, treasury holdings included 847.7 BTC now worth $56.4 million and 15,593.1 Ethereum (ETH-USD) now worth $59.2 million. February 2024 saw BTBT mine 128.7 additional BTC. With Bitcoin poised for rapid appreciation, BTBT seems ready to capitalize.
On the date of publication, Omor Ibne Ehsan did not hold (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.