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      7 Cheap Stocks To Buy Under $5 For Investment

      By Wasim Omar

      Published on

      June 1, 2023

      7:22 AM UTC

      Last Updated on

      August 16, 2023

      10:53 AM UTC

      7 Cheap Stocks To Buy Under $5 For Investment

      When it comes to investing in stocks, there is a vast array of options available, but often overlooked are the potential gems hidden among cheap stocks priced under $5.

      These low-priced stocks offer an enticing opportunity for investors looking to maximize their investment potential without breaking the bank.

      In this article, we will explore the world of affordable stocks and delve into the strategies and considerations when investing in cheap stocks to buy under $5, revealing how this segment of the market can hold promising prospects for astute investors.

      What to Consider When Buying Cheap Stocks

      When considering cheap stocks to buy under $5, it is essential to be aware of certain key factors that can greatly influence investment outcomes. Here, we will delve into the important considerations that investors should keep in mind:

      • Understanding the Risks

        Even the most well-performing and top stocks under $5 can be risky due to poor timing. Pay attention to financial performance, and market volatility, especially with challenging industries, so be prepared for potential downside and volatility.

      • Fundamental Evaluation

        Before investing in 5 dollar stocks, thoroughly research the company’s financial health, growth prospects, and competitive position to identify those with solid fundamentals and potential catalysts for growth.

      • Growth Prospects & Trends

        Analyze key financial metrics, assess the company’s growth strategy, and consider industry trends to determine its potential for future success and alignment with market shifts.

      List of 7 Cheap Stocks to Buy Under $5

      Rover

      Rover Group Inc. (NASDAQ: ROVR) is a global online marketplace that brings together pet owners and caregivers from around the world, facilitating a wide array of pet care services including overnight boarding, in-home pet sitting, dog walking, grooming, and training.

      The company recently reported very strong results with quarterly revenue of $41 million, demonstrating a 48% year-on-year topline growth. It also delivered its first quarter of positive adjusted EBITDA of $600,000 compared to the negative figure of $4.8 million last year.

      Rover is a disruptor to a traditional space, and is a great pick, considering that it has only captured a fraction of the global pet care market. Its recent launch saw its first-ever merchandise collection, enhancing value proposition and customer loyalty.

      Ginkgo Bioworks

      Ginkgo Bioworks Holdings (NYSE: DNA) is a biotech company developing a platform to program cells for the production of various products, including therapeutics, food ingredients, industrial chemicals, and pharmaceuticals. The stock is currently trading at $1.35.

      Despite a fall in its biosecurity segment revenue after the end of the Covid-19 phenomenon, Gingko saw its total revenue in 2022 rise from $314 million to $478 million. Due to its prospects, analysts give Ginkgo a target price of $3.45, giving it substantial upside potential.

      Ginkgo is an early player in the biotech space that is steadily gaining growing. Milestone payments and royalty inflows are likely to act as a significant boost to the company’s already solid liquidity position.

      The company’s recent partnership with Octarine Bio to develop the violacein pigment also points to diversification benefits that certainly bode well for Gingko’s prospects. As such, it is a star play in this list of cheap stocks to buy under $5.

      Lumen Technologies

      Lumen Technologies Inc. (NYSE: LUMN) is a facilities-based tech and ICT company providing integrated products and services to business and residential customers globally. The company is currently undergoing radical restructuring following consistent losses in prior years.

      Lumen’s financial position improved with a significant reduction in long-term debt by nearly $700 million through a debt exchange in March, resulting in a shareholder equity increase of over $500 million to $11 billion.

      Despite a $100 million expenditure in Q1, Lumen maintains a cash reserve of over $1 billion. This gives it ample leeway to remain solvent as it undergoes a transformation. Analysts maintain that its $2.36 price reflects a serious bargain after improvement in its balance sheet.

      Southwestern Energy Company

      Southwestern Energy Company (NYSE: SWN) is an independent energy company that focuses on exploring, developing, and producing natural gas, oil, and natural gas liquids (NGLs) in the US. It operates as both a producer of the aforementioned fuels and a marketer of them.

      Boasting some of the lowest-cost extraction sites, such as Appalachia, SWN enjoys a clear financial edge in the exploration game. As a result, its annual revenue ballooned from $2.3 billion in 2020 to a whopping $15 billion by the end of 2022.

      SWN is among the top energy stocks to buy, for its low price of $4.75. It is even a great pick when considering natural gas prices have been sailing at 14-year highs since 2022. This makes the present situation a great time to invest in a star player like SWN.

      Polestar Automotive

      Polestar Automotive Holding UK PLC (NASDAQ: PSNY) is a Swedish premium EV manufacturer, that has been steadily gaining ground in the international markets. Polestar was founded in 2017 and currently trades at a price of $3.97.

      Despite its early stage of operations, Polestar shows a resilient top and bottom-line climb. It beat EPS estimates of negative $0.13 and came in with a negative $0.09 figure. While revenue for 2022 stood at $2.5 billion, management is confident to surpass $9 billion by 2024.

      Last year the company reported a record-breaking 51,000-figure volume of sales across the globe. This year, it is set to crush the benchmark considering 26,000 vehicles were delivered in the first quarter alone. Polestar is a great EV pick at this booming stage of operations.

      Payoneer

      Payoneer Global Inc. (NASDAQ: PAYO) is a global payment and commerce platform that offers services such as cross-border payments and facilitates transactions worldwide in a seamless manner. It is presently trading at $4.73, with an analyst consensus target of almost $9.

      The Payoneer stock surged by nearly 17% after the release of Q4 results, surpassing expectations with an EPS of -$0.03 (beating estimates by $0.02) and revenue of $183.6M (exceeding estimates by $12.7M), and showcasing topline growth of almost 32%.

      Analysts have revised estimates upwards in the last 90 days, anticipating strong growth in FY23, without any downward revisions. Moreover, Payoneer’s recent collaboration with Zoho indicates its expansion ambitions, and focus on the small businesses market.

      With its prospects and performance, PAYO is presently too good to ignore at its current price, making it a bargain for value investors. It is among the most compelling names on our list of cheap stocks to buy under $5.

      Opendoor Technologies

      The final stock on our list of cheap stocks to buy under $5 is Opendoor Technologies Inc. (NASDAQ: OPEN), which operates an online platform for buying and selling homes.

      Opendoor provides homeowners with the option to sell their homes directly to Opendoor, who can then sell the homes to potential buyers.

      Opendoor’s value proposition is customer convenience and process optimization which simplifies and streamlines the buying and selling process through their online platform.

      By the end of 2022, Opendoor reported top and bottom-line growth of 95% and 57% respectively, indicating the appeal of its streamlined platform in the real estate market.

      Despite its long-term debt of $4 billion, Opendoor’s balance sheet remains solid with cash holdings of $1.2 billion, and real estate inventory of $5.5 billion.

      Opendoor seeks to disrupt the traditional model of selling residential units. The certainty and convenience of its cash offers make it a prime digital real estate platform. Its upside potential makes it a screaming buy.

      Advantages of Investing in Cheap Stocks

      When considering the advantages that come with investing in top stocks under $5, their popularity immediately becomes justified. Some of these core strengths are mentioned below:

      • Capital Appreciation

        Investing in cheap stocks under $5 offers the potential for substantial price appreciation, which can result in significant returns for investors.

      • Diversification

        Allocating a portion of investments to cheap stocks allows for portfolio diversification across different sectors and industries, reducing the impact of any single stock’s performance. This can also be achieved through any ETF under $5.

      • Capital Appreciation

        Investing in cheap stocks under $5 offers the potential for substantial price appreciation, which can result in significant returns for investors.

      Disadvantages and Risks of Investing in Cheap Stocks

      While the benefits of investing in cheap stock below $5 may seem compelling to many, it is important not to let those strengths blindside an investor from the risks and potential drawbacks of such an investment strategy. Some of these are as follows:

      • High Volatility

        Cheap stocks are often associated with smaller companies or those facing financial challenges, making them more susceptible to market volatility and higher risk compared to established higher-priced stocks.

      • Liquidity Risk

        Cheap stocks may have lower trading volumes and less investor interest, resulting in less liquidity. This can make it difficult to buy or sell shares at desired prices, potentially leading to challenges in executing trades.

      • Potential of Financial Distress

        Some cheap stocks may be priced low due to fundamental weaknesses, poor financial performance, or uncertain prospects. Investing in such stocks carries a higher probability of financial distress, including the risk of bankruptcy or significant losses.

      Conclusion

      Investing in cheap stocks under $5 can present both opportunities and challenges for investors. While these stocks offer the potential for high returns and the chance to diversify portfolios, they also come with inherent risks that should be carefully considered.

      Each of the stocks mentioned above are top player in their respective industries, and their affordable price tags make them particularly attractive for investors seeking potential opportunities.

      While their low prices may reflect temporary market conditions or challenges, it is important to note that cheap stocks can also offer hidden value and growth potential.

      Conducting thorough research and seeking professional guidance can help identify undervalued companies with strong potential for future success.

      Frequently Asked Questions

      How To Buy Stocks?

      To buy stocks, you can open an investment account with a brokerage firm, deposit funds, research and select the desired stocks and place a buy order through the brokerage platform.

      What Broker or App Should I Choose?

      When choosing a broker or app, consider factors such as fees, user-friendliness, available research tools, customer support, and security, with popular options including Robinhood, TD Ameritrade, E*TRADE, and Charles Schwab.

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