3 High Tech Stocks Under $20

A company’s value is not really defined by its stock’s trading price. For example, a company with a market cap of $500 billion may trade at $20, while a company with a market cap of $1 billion may trade at $50.

That said, some investors still prefer to buy round lots (100 shares) at $20 or less over odd lots (fewer than 100 shares) because they’re easier to track. Round lots also give them the option to sell covered calls because an option contract is tied to 100 shares, which means they will generate income from those positions.

So today, I’ll take a closer look at three unloved tech stocks that trade below $20 — AT&T (T -1.05%), Magnet (MGNI -0.83%)And Neo (No 5.50%) — and explain why they’re likely to rise over the next few years.

1. AT&T

AT&T has given up on its dreams of becoming a media giant. Netflix (NASDAQ: NFLX ) In the past two years, it has divested DirecTV, WarnerMedia and other non-core media assets. It then focused on strengthening its core telecom business by upgrading its 5G and fiber networks.

AT&T in 2010 It has 2.9 million postpaid phone subscribers by 2022, its biggest competitor; Verizon (NYSE: VZ ), added only 201,000 equivalent subscribers. That growth continued in the first quarter of 2023 as AT&T gained another 424,000 postpaid phone subscribers as Verizon lost 127,000 equivalent subscribers.

Strong growth in AT&T’s mobile and consumer wireline units offset macro-induced declines in its business wireline unit last year. The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margins are still expanding and are expected to generate $16 billion in free cash flow (FCF) this year. However, AT&T generated just $1 billion in FCF in the first quarter — raising some concerns about its ability to expand with rising costs.

AT&T insists that restructuring costs peaked in the first quarter, and analysts still expect adjusted EBITDA to grow 3% this year on 1% revenue growth. That near-term outlook may seem anemic, but the stock looks dirt-cheap at 6 times adjusted EBITDA this year, and it still pays an attractive dividend yield of 6.3 percent going forward.

2. Magnet

In the year Magnet, born from the 2020 merger of two small ad technology companies, is the world’s largest independent sell-side platform (SSP) for digital ads. SSPs help publishers sell their own digital ad inventory across desktop, mobile and connected TV (CTV) platforms, and sit at the opposite end of the ad supply chain as demand-side platforms (DSPs), allowing advertisers to compete on that. Advertising space.

Magnet’s reported growth was boosted by the first merger and some large acquisitions in 2020 and 2021. In 2022, adjusted EBITDA increased by 20% while revenue grew by 23% (24%). However, when it completed its acquisition of Magnet, growth slowed and macro headwinds battered the broader ad market.

This year, analysts expect Magnet’s revenue to grow just 6% while adjusted EBITDA declines 1%. That slowdown was mainly due to the decline in the CTV business, which could accelerate again soon after the macro situation improves.

But over the long term, Magnite expects to grow annual revenue by more than 25% on an organic basis as it maintains adjusted EBITDA margins of 35% to 40%. That promising long-term outlook — and the fact that Magnet is trading at 9 times adjusted EBITDA this year — makes it a significant turnaround in a new bull market.

3. Neo

Last but not least, the Chinese EV maker Nio, though in 2010 Despite offering 122,486 sedans and SUVs by 2022, it has received little attention from American investors. That represents a 34 percent jump from 2021 — as it struggles with supply chain constraints. In comparison, the company’s struggling American counterpart Rivian (NASDAQ: RIVN ) It produced only 24,337 vehicles last year.

What sets Neo apart from its domestic and overseas competitors is its battery exchange network, which allows members to quickly exchange depleted batteries for fully charged batteries. That approach avoids long charging times while generating secondary LaCarte streaming and subscription-based battery revenue for the company.

Neo is still not profitable, but with its net losses narrowing, analysts expect revenue to grow at a compound annual growth rate (CAGR) from 2022 to 2025. This is a jaw-dropping growth for a stock that only traded 1 time. Annual sales. For reference, the Rivian — which faces a tough uphill battle — will sell nearly double this year.

Investors appear to be avoiding neon as cancellation threats continue to hang over US-listed Chinese stocks. As long as high interest rates continue to penalize unprofitable companies, the broader EV sector will remain unprofitable. However, patient investors who can weather these near-term challenges can strike gold in Neo.

Leo Sun has positions in AT&T and Magnite. He has spots in the Motley Fool and recommends Magnite, Netflix, and Nio. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.