The Dow, S&P 500, and Nasdaq all fell over 1.5% Friday, as investors worry about how the coronavirus might impact the global economy, especially amid growing travel restrictions.
The coronavirus has already infected nearly 10,000 people, which is more than SARS did roughly 20 years ago, and killed at least 213. Now the question is will the coronavirus—currently contained mostly within China— simply cool down a red hot market, or will it lead to a broader downturn?
The bear case is harder to see that this point, with giants such as Apple AAPL, Microsoft MSFT, Amazon AMZN, and Tesla TSLA all posting blowout earnings in the last week of January alone. Corporate earnings are also expected to return to growth in 2020.
Plus, the Fed maintained low interest rates, U.S. unemployment remains near 50-year lows, and the U.S. economy is expected to expand by at least 2% in 2020. Our Director of Research here at Zacks, Sheraz Mian, broke down the current situation on Friday afternoon in a piece titled Should You Buy the Dip?
He discusses a ton of details and concludes: “All in all, this is the best time to be fully invested in the market, particularly if you are investing for the long haul. And I would definitely be a buyer on any dip because it looks like there’s a lot more upside to go.”
With this in mind, let’s dive into three cheap stocks, trading under $20 a share that investors might want to buy, or at least keep an eye on amid coronavirus fears…
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Cloudflare Inc. NET” data-reactid=”24″>Cloudflare Inc. NET
Prior Close: $17.86 USD
Cloudflare is a provider of cloud-based networking and cybersecurity services that went public in September 2019, as part of a crowded year for tech-focused IPOs, including everyone from Uber UBER to Pinterest PINS. The San Francisco-based firm, which boasts that it is on a “mission to help build a better Internet,” saw its stock price surge early on to over $20 per share. It then fell pretty abruptly, but NET stock is up over 10% since it reported its first quarterly results as a public firm in early November.
Cloudflare’s Q3 revenue surged 48% and its gross margin came in at an impressive 78.3%. Looking ahead, our Zacks estimates call for NET’s fiscal 2019 revenue to soar 46% from $192.7 million in 2018 to $282.2 million. Its 2020 sales are then projected to jump another 33.3% higher to $376 million.
Like many young tech firms, Cloudflare is expected to post an adjusted loss of -$0.50 a share in 2019, which is then expected to shrink to just -$0.20 in 2020. Cloudflare’s positive earnings revision activity helps it hold a Zacks Rank #2 (Buy) right now and it could be poised to grow for years as cybersecurity becomes more vital.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="WPX Energy, Inc. WPX” data-reactid=”29″>WPX Energy, Inc. WPX
Prior Close: $11.95 USD
WPX Energy is an independent energy producer that operates mostly in the Permian and Williston basins. The Tulsa, Oklahoma-based firm’s production consists of approximately 80% oil/liquids and 20% natural gas. Shares of WPX have climbed 28% in the past six months, which includes an 18% jump since the end of November. WPX announced in mid-December its $2.5 billion purchase of Felix Energy, which operates in the Delaware Basin.
The companies expect the deal will close early in the second quarter of 2020, and when it does WPX plans to introduce a dividend. The deal and the dividend are part of a new five-year vision to return to more value shareholders.
WPX is trading right in line with its industry’s average and sports an “A” grade for Value in our Style Scores system. WPX also earns a “B” grade for Growth and holds a Zacks Rank #2 (Buy) at the moment. Looking ahead, WPX’s adjusted EPS figures are projected to soar 289% in 2019 and another 131% in 2020 on the back of strong top-line expansion.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Navient Corporation NAVI” data-reactid=”34″>Navient Corporation NAVI
Prior Close: $14.38 USD
Navient offers education loan management and business processing solutions for education, healthcare and government clients at various levels from local to federal. NAVI topped our Q4 earnings estimates recently by over 17%. This is part of a solid string of bottom-line beats for Navient, which includes a 21% average beat over the trailing four periods. Plus, on January 28, the company announced that it accelerated its share repurchase plans.
Shares are up 26% in the last year and Navient’s strong 4.30% dividend yield helps return even more value to shareholders. This yield crushes the 10-year U.S. Treasury’s 1.5%, as well as industry peers such as Ally Financial ALLY and OneMain Holdings OMF that both currently yield around 2.34%. NAVI’s earnings are projected to jump 13% this year and 10.6% next year, as it continues to lower its expenses. Navient also holds a Zacks Rank #2 (Buy) right now, along with “A” grades for Value and Momentum.
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