The Dow, S&P 500, and the Nasdaq all touched new records once again on Tuesday, as the market’s vaccine-boosted rally continues. The gains come as the U.K. began administering doses of Pfizer (NYSE:PFE) and BioNTech’s Covid-19 vaccine. Plus, there appears to be more positivity on the stimulus front in the U.S.
It’s important to remember that the vaccine news helped the market widen the scope of its climb in November far outside of the pandemic gainers within tech and big retail. On top of that, the third quarter earnings season came in better than expected and the outlook for Q4 and FY21 was already improving well before the vaccine news.
The importance of low interest rates also can’t be overstated enough and it helps further set up the bullish case for 2021. Given this backdrop, we are diving into three stocks within a fun sector of the market—stocks trading for under $10 a share—that boast strong Zacks Ranks and have solid fundamentals. All three might be worth buying as we get closer to the end of 2020…
Himax Technologies (NASDAQ:HIMX), Inc. HIMX
Prior Close: $6.93 USD
Himax is a fabless semiconductor firm focused on display imaging processing technologies. HIMX’s solutions are utilized in everything from TVs, laptops, and smartphones to navigation systems, virtual reality devices, and more. The firm has posted three-straight quarters of strong revenue growth, including a 46% climb in Q3.
Zacks estimates call for its adjusted Q4 EPS figure to soar from $0.01 to $0.16 on the back of 51% higher sales. HIMX is projected to post similar top and bottom-line growth in Q1 FY21.
Overall, its full-year revenue is projected to climb 30% this year to $875.4 million, with FY21 expected to jump 22% higher to reach $1.1 billion. Both of these estimates would mark its best top-line expansion as a public firm. Meanwhile, it’s expected to swing from an adjusted loss of -$0.07 a share to +$0.25, with FY21 expected to surge to +$0.44 a share.
Himax’s earnings revision picture has also turned far more positive to help it earn a Zacks Rank #2 (Buy) right now. HIMX lands an “A” grade for Growth and a “B” for Value in our Style Scores system and two of the three brokerage recommendations that Zacks has for Himax come in at a “Strong Buy.”
Shares of HIMX have climbed roughly 70% in the last month after it posted its Q3 results on November 12. The stock is now up 190% in the last year to blow by its industry and its peer group. The stock touched new records earlier in December, yet it still rests about 50% below the nearly $14 a share it hit in 2017.
Along with its cheap price tag, the stock trades at a discount to its industry at 1.1X forward 12-month sales vs. 4.9X. Investors should also note that Himax improved its gross margin last quarter. More importantly, displays are an integral part of countless devices.
Prior Close: $9.41 USD
Like HIMX, Glu Mobile is set to benefit from the continued proliferation of screens, or more precisely, how much time people spend glued to their smartphone screens. Glu is a mobile video game firm with a portfolio that includes Deer Hunter, Kim Kardashian: Hollywood, MLB Tap Sports Baseball, Disney Sorcerer’s Arena DIS, and other popular titles.
Mobile gaming as a whole plays a pivotal role in the growth of the broader gaming industry that is projected to expand from $159 billion this year to over $200 billion by 2023. Plus, mobile is projected to account for roughly 50% of the market compared to console’s 28% and PC’s 25%.
Glu beat our Q3 earnings estimates by roughly 60% in early November, with sales up 48% to a company record $158.5 million. Zacks estimates call for its fiscal 2020 sales to climb 31% to $556 million, with another 11% expansion projected in FY21. Meanwhile, the mobile gaming firm’s adjusted earnings are expected to skyrocket 141% this year and another 34% next year. And Glu’s positive earnings revisions help it grab a Zacks Rank #2 (Buy).
GLUU holds “A” grades for Growth and Momentum and 10 of the 11 brokerage recommendations Zacks has for the stock come in at a “Strong Buy.” The firm is also part of a highly-ranked industry that includes Activision Blizzard (NASDAQ:ATVI) ATVI, Mattel (NASDAQ:MAT) MAT, and others.
GLUU is up 60% in the last year to more than double its industry’s average climb and it’s up 20% in the last month. Despite this run, it trades 12% below its 2019 highs, and its valuation appears far more enticing than its industry at 2.6X forward 12-month sales vs. 5.7X.
The Michaels Companies (NASDAQ:MIK) MIK
Prior Close: $12.07 USD
Michaels is an arts and craft-focused retailer that operates roughly 1,300 stores throughout the U.S. and Canada and its relatively unique offerings help it standout and fend off competition from the likes of Esty ETSY and Amazon AMZN. MIK sells everything from framing and wall décor to crafts and seasonal merchandise geared toward the DIY crowd.
Michaels falls outside of our under $10 a share range right now, but that’s because it has ripped higher in the last several sessions, which includes the release of its Q3 results on December 3 (it was trading under $10 on November 30).
The company is coming off back-to-back quarters of its strongest sales growth in years as people looked to keep busy while staying at home, with Q2 revenue up 11% and Q3 up 15%. This growth was helped along by huge e-commerce expansion, which includes contactless pick-up, delivery, and more. MIK’s growth is projected to slow down, but it is still expected to see its Q4 revenue climb 5.5% to hit $1.8 billion to help lift its adjusted earnings by 16% to $1.46 a share.
MIK’s bottom-line outlook has surged since its report to help it earn a Zacks Rank #1 (Strong Buy). The stock is also part of an industry that rests in the top 14% of our over 250 industries and it grabs an overall “A” VGM score.
Shares of Michaels have climbed over 60% in the last month and 85% in the past year. Yet MIK still has roughly 60% more room to run before it would reach the $30 a share it traded at in 2016.
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