Generally speaking, you get what you pay for, which should be a warning for speculating on low-priced securities, even if they’re labeled the best cheap stocks under $5. Yes, I’m already working against my own thesis. However, it’s very important you understand the extraordinary risks involved with speculating on companies stuck in the pricing doldrums.
Psychologically, the appeal is understandable. With the low entry point, it’s possible for investors to rack up a significant number of shares for a relatively low net cost. At the same time, enterprises that are considered the best cheap stocks may also suffer from cheap valuations. In rare cases, that could mean bargains waiting to be unearthed. Usually, though, you’re dealing with value traps.
Still, on the optimistic side, speculators could possibly make the argument that the best cheap stocks under $5 have been significantly de-risked. Unlike heavily hyped entities, the low-cost securities may be flying under the radar. Should a broader downturn materialize, they might avoid the brunt of the damage.
Nevertheless, this arena is appropriate only for gamblers. If that’s you, maybe (and only maybe) should you consider these best cheap stocks under $5.
Priced at nearly a quarter above $2, shares of Telos (NASDAQ:TLS) operate at the lower end of the underlying theme. Also, you’ve got to consider two factors. First, since the beginning of this year, TLS hemorrhaged nearly 57% of its equity value. Second, its market capitalization sits at just under $156 million. So, while TLS may be a candidate for the best cheap stocks, you should also expect volatility.
Then again, if you’re an optimist, you may notice two possible catalysts moving in your favor. First, the company specializes in information technology and cybersecurity. It also features a number of high-level government contracts. Given the worrying pace and devastation of cyberattacks, Telos may see increased demand.
Second, shares have stabilized considerably. For example, in the trailing one-month period, TLS gained over 15%. Therefore, it’s possible that a bottom may have been printed.
Analysts also appreciate TLS, rating it a moderate buy with a $3.38 target, implying nearly 51% upside.
A public advertising agency, Taboola.com (NASDAQ:TBLA) presents a complex and nuanced case for best cheap stocks under $5. Regarding the pessimistic side of the argument, it’s relatively easy to be down on TBLA. In the trailing five years, for example, shares gave up over 65% of equity value. More importantly, the digital content space which Taboola mainly serves suffers from rising viability concerns.
Then again, one also must wonder, where will people get their content if not online? For as much criticism that exists regarding digital media and the accompanying ad space, it’s not as if physical news and magazines are making a comeback. In that sense, the winners might emerge from the Covid-19 doldrums. Subsequently, Taboola may then serve said winners.
Also, the recent performance isn’t bad at all. Since the January opener, TBLA gained 13%. In the trailing year, it’s doubled its value. As well, analysts peg TBLA a strong buy with a $5.90 target, implying almost 70% growth.
Digital Turbine (APPS)
Another intriguing but complicated narrative for best cheap stocks under $5, Digital Turbine (NASDAQ:APPS) is relevant but also risky. According to its website, Digital Turbine is a leading independent growth and monetization platform. It claims to level the playing field for advertisers, publishers, operators, and original equipment manufacturers (OEMs). Specifically, its business centers on a mobile ad stock, enabling the optimization of end-to-end mobile advertising experiences.
Given the proliferation of smart devices and their easy, everyday utility, investors can easily see the underlying relevance. Nevertheless, at a time when some of the biggest companies are distributing pink slips, management teams are basically looking to reduce costs, not add them. As a countervailing argument, though, now’s also the time to distinguish oneself from the competition.
Financially, Digital Turbine suffers from mediocre fiscal stability and profitability. However, it’s a growth machine, printing a three-year revenue growth rate of 61.6%. Analysts like it, rating it a moderate buy with a $9 target, implying almost 89% upside.
Archer Aviation (ACHR)
Probably the most exciting idea for best cheap stocks on this list, Archer Aviation (NYSE:ACHR) develops electric vertical takeoff and landing (eVTOL) aircraft. Basically, the company is building the next generation of platforms designed for air mobility services. Fundamentally, it’s an intriguing business because of eVTOL crafts’ many advantages over helicopters, primarily a quieter noise profile.
Also, the eVTOL market should see tremendous growth. According to Precedence Research, the global sector reached a valuation of $11.15 billion last year. By 2032, the segment should hit $35.79 billion, representing a compound annual growth rate (CAGR) of 12.37%.
That’s the positive side. On the not-so-pleasant level, eVTOLs still face significant legal and regulatory challenges. Because of this factor, ACHR is volatile. In the trailing five sessions, it lost almost 13%. So, you’ve got to be confident in the narrative. Still, that’s what analysts are, pegging ACHR a unanimous strong buy with a $9.50 target, implying 109% growth.
Cambium Networks (CMBM)
An interesting but awfully risky idea for best cheap stocks under $5, Cambium Networks (NASDAQ:CMBM) should be approached with the highest level of caution and scrutiny. First, the market cap is awfully low at under $123 million. Second, since the beginning of this year, CMBM fell more than 79%. After peaking in 2021, shares struggled for any hint of traction.
On the glass-half-full side, Cambium offers a relevant business. Per its website, the company is a leading global provider of multi-gigabit Wi-Fi and broadband for business, residential, and municipal applications. It also collaborates with and serves network operators in education, healthcare, industrial campuses, and municipalities.
Also, Cambium benefits from a large total addressable market. Per Mordor Intelligence, the fixed wireless access market is presently worth $21.66 billion. In five years’ time, the sector may reach $151 billion, representing a CAGR of 38.17%.
Is that enough to overcome the risks? Analysts think so, rating shares a moderate buy with a $10.13 target, implying almost 128% upside.
Based in Emeryville, California, OmniAb (NASDAQ:OABI) is an advanced biotechnology firm. According to its website, the company has been offering best-in-class therapeutic antibody discovery technologies since 2012. With the innovation, OmniAb provides its pharmaceutical industry partners access to the most diverse antibody repertoires and cutting-edge screening technologies, thus facilitating the discovery of next-generation therapeutics.
If you think that the biotech is extraordinarily relevant, it’s exactly that. Unsurprisingly, OABI skyrocketed almost 31% since the January opener. From the print, it appears as a no-brainer idea for best cheap stocks under $5. However, when you’re dealing with entities with a market cap just over $500 million, you’re bound to encounter volatility.
Sure enough, in the trailing five sessions, OABI slipped more than 8%. And in the trailing month, it’s down nearly 15%. Yes, I suppose you can use the de-risking argument but remember: speculative biotechs can move violently. Nevertheless, analysts peg OABI a unanimous strong buy with a $10.50 target, implying 132% growth.
Planet Labs (PL)
It’s quite possible that among all the so-called best cheap stocks under $5 on this list, Planet Labs (NYSE:PL) may be the crowd favorite. As an Earth imaging specialist, the company aligns with the burgeoning space economy. Strategically, the space economy attracts because of the wide addressable market. Per McKinsey & Company, the sector could reach a valuation of $1 trillion by 2030. That’s not too far away.
Moreover, what I appreciate about Planet Labs is that its business isn’t some novelty act with esoteric utility. Its satellite service carries significant implications for climate change mitigation. Also, media agencies have used Planet Labs to investigate stories of geopolitical and national security implications. So, the company’s relevance isn’t under question.
What does fall under question, though, is viability. In particular, its sales growth rate has slowed on a trailing-12-month (TTM) basis. Also, it’s not profitable. Still, analysts love it, rating PL a unanimous strong buy with a $5.48 target, implying 162% upside.
On the date of publication, Josh Enomoto 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.