Stocks that trade at low prices are easily accessible to a wide group of investors (ie, you don’t need to buy fractional shares), which can lead to greater liquidity and faster-moving stock. However, that can be both a blessing and a curse, depending on whether there is bearish or bullish news surrounding a business.
One way to increase your chances of success with these low-priced stocks is to invest in companies with significant growth opportunities. Two stocks trading below $10 a share that growth investors will want to consider buying long-term are ginkgo bioworks (DNA 12.10%) Y Palantir Technologies (PLTR 2.67%). Let’s find out a little more about these two growth stocks.
1. Ginkgo bioworks
Ginkgo Bioworks is a cell programming company that Cathie Wood, CEO of ARK Invest, is a fan of; she is currently trading at just over $3 a share. The promise of the business is that it has the potential to achieve growth in many different industries. In the food and agriculture industry, she projects that demand for engineered products could be worth at least $800 billion over the next two decades. And in health care, the potential could be upwards of $500 billion. There are also opportunities in consumer goods, materials and energy, and other industries.
The company has partnered with the cannabis producer Cronos Group to develop cultivated cannabinoids that can be produced efficiently at scale while offering unique products to the cannabis industry. It has also teamed up with healthcare giant Bayer on agricultural biological programs that can help increase crop yields for farmers.
Ginkgo is full of growth opportunities and is already generating strong results today. For the first six months of 2022, its revenue of $313 million was more than triple the $87.7 million it reported in the prior year period. For the full year, it anticipates between $425 million and $440 million in revenue, which, at the midpoint, would be a 38% increase from the $313.8 million it generated in 2021.
Unfortunately, with losses totaling nearly $1.3 billion over the last two quarters, there is still significant dilution risk for investors. And that’s probably a key reason why its shares fell 62% during the first nine months of the year. Ginkgo is a high-risk, high-reward stock that could pay off, but investors will need a lot of patience as returns can take many years.
2. Palantir Technologies
Palantir is a data analytics company that provides value to businesses and governments alike, with the latter using it for defense and counterterrorism operations. Using artificial intelligence and machine learning, the company’s models can speed up the decision-making process by processing information “on the fly” to generate insights for its users. Its shares are trading at just over $8.
The company’s business has been generating impressive growth this year, with sales of $473 million for the second quarter (ended June 30), up 26% year over year. And for the full year, it expects sales to be around $1.9 billion, a little over 23% higher than the $1.5 billion Palantir reported in 2021. Much of the company’s future growth potential is in business customers, as sales in that segment increased 46% in the second quarter compared to just 13% revenue growth from government-related customers. The short-term risk is that amid inflation and reduced purchases of large companies by companies, Palantir could face some challenges in growing its trading business.
Like Ginkgo, Palantir is not currently a profitable company. Its net loss in the second quarter amounted to 179.3 million dollars. However, CEO Alex Karp said he anticipates that by 2025, Palantir’s finances will improve enough for the business to operate profitably.
The sensible CEO has always focused on the long term, with a goal of generating 30% annualized revenue growth. Although Palantir’s growth rate has slowed in recent quarters, the business still generates strong numbers. But that, unfortunately, hasn’t been enough to keep investors going, as Palantir shares are trading down 55% year-to-date and underperforming last year. S&P 500which is down 23%.
If Palantir can improve your bottom line for years to come, that will make the stock a much better buy. So if you’re willing to trust Karp’s vision and wait until 2025 for the company to achieve its goals of being profitable and generating $4.5 billion in revenue, this could be a solid buy.
David Jagielsky has no position in any of the mentioned stocks. The Motley Fool holds positions and recommends Palantir Technologies Inc. The Motley Fool has a disclosure policy.