2 Great Stocks Under $10: Nokia and Glu Mobile
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Investors should never judge stocks based on just their price, since prices are meaningless unless they're paired with growth estimates and valuations. That being said, stocks generally don't drop under $10 unless there are fundamental problems and there are plenty of lemons in the market's bargain bin. But investors who are willing to shoulder some risk might find a few hidden gems with strong growth potential. Here are two promising stocks that fit that description: Nokia (NYSE: NOK) and Glu Mobile (NASDAQ: GLUU).
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Nokia
Nokia is the third-largest network infrastructure equipment maker in the world after Huawei and Ericsson. The company no longer produces smartphones -- Nokia-branded devices are produced by HMD Global, a separate company that pays Nokia licensing fees.
Over the past few years, Nokia's stock has been weighed down by tougher competition from Huawei (particularly in China); slower spending from telcos, which prioritized digital ecosystem upgrades over the expansion of their networks; and concerns about the size and effectiveness of its $17 billion merger with Alcatel-Lucent in 2016.
Those pressures caused Nokia's non-IFRS sales to fall 3%, or 1% on a constant-currency basis, last year. But on the same basis, its net earnings rose 50%, supported by the growth of its higher-margin Nokia Technologies (patent licensing) unit and the integration of Alcatel-Lucent's operations.
Nokia this week reported that its non-IFRS sales fell 7% annually (but stayed flat on a constant-currency basis) during the first half of the year. Declines at its Nokia Networks unit, which faced softer carrier spending and tougher competition, were partly offset by double-digit sales growth at Nokia Technologies. Its non-IFRS EPS tumbled 64% due to tough year-over-year comparisons, higher operating expenses, and stronger competition.
For the current year, analysts expect Nokia's revenue to rise 1%, but for its earnings to slide 24% on the aforementioned headwinds. However, Nokia recently signed major 5G deals with China Mobile (NYSE: CHL), the country's top wireless carrier, and diversified tech giant Tencent (NASDAQOTH: TCEHY). Those partnerships, along with the global rollout of new 5G networks (particularly in North America and China), are expected to boost Nokia's revenue and earnings by 3% and 36%, respectively, next year.
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Those are decent growth rates for a stock that trades at just 15 times forward earnings. Nokia also pays a hefty forward dividend yield of 4.1%. Nokia's stock won't soar anytime soon, but the stock's low valuation and high yield should limit its downside potential.