We recently published a list of 12 Best Nasdaq Stocks Under $20 to Buy Now. In this article, we are going to take a look at where Freshworks Inc. (NASDAQ:FRSH) stands against other best Nasdaq stocks under $20 to buy now.
The Nasdaq has had a challenging start to 2025, with the index dropping nearly 12% YTD, as of March 13. March 10 marked its worst single-day decline in almost two years, plunging 4% as investor concerns over escalating trade tensions fuelled fears of a potential U.S. recession. Given that technology companies make up approximately 60% of the Nasdaq, the sector’s heightened volatility has played a significant role in the index’s decline. Consumer discretionary stocks, the second-largest sector in the Nasdaq, account for roughly 20% of its total weight. This heavy concentration in growth-driven industries makes the Nasdaq a key indicator of the performance of both the technology sector and high-growth stocks.
A closer look at sector exposure provides further insight into recent market movements. On March 7, Reuters cited a Goldman Sachs report highlighting that hedge funds specializing in stock picking and multi-strategy investing saw nearly half of their annual gains erased in a single day following a tech-driven selloff on March 6. The most significant declines were concentrated in sectors where hedge funds had high exposure, including technology, media, and telecommunications. Year-to-date, the technology sector has been the second-worst performer in the S&P 500, falling 8%, while consumer discretionary stocks have led declines with a drop of over 9%.
Market volatility is likely to persist as economic indicators continue to send mixed signals. Treasury Secretary Scott Bessent recently stated that the U.S. economy may undergo a “detox period” as the new administration implements government spending cuts. However, he later clarified that a recession is not an inevitable outcome. With policy changes creating uncertainty, market turbulence could remain a recurring theme.
John Belton, a portfolio manager for growth equities at Gabelli Funds, shared his perspective on Nasdaq’s recent volatility during an appearance on CNBC’s ‘The Exchange’. He described the current market sentiment as a “buyers’ strike,” driven by uncertainty over policy direction from the White House. According to Belton, Wall Street is hesitant to take on additional risk in such an unpredictable environment. Despite the recent downturn, he emphasized that the fundamentals of major mega-cap technology companies remain strong. He also noted that Nasdaq’s exceptional performance in the past two years—gaining over 40% in 2023 and more than 30% in 2024—set high expectations among investors. The current correction, he suggests, is a natural reaction to those lofty expectations, coupled with the transition in political leadership.
While Nasdaq has delivered impressive returns in recent years and remains home to some of the world’s leading technology giants, it also presents compelling opportunities beyond large-cap tech. Investors looking for promising yet lower-priced stocks, particularly those trading under $20, may find attractive options within the index. These stocks often belong to companies with significant growth potential, making them appealing to both institutional and retail investors seeking high-upside investments at a relatively affordable price point.
Our Methodology
To determine the 12 best Nasdaq stocks under $20 to buy, we conducted a screening for Nasdaq-listed companies with a share price below $20 and a market capitalization exceeding $2 billion. We applied an additional criterion, considering only those stocks with an expected upside of at least 10%. Finally, we ranked the top 12 stocks that were the most widely held by hedge funds in ascending order of hedge fund holders, based on data from Insider Monkey’s Q4 2024 database of hedge funds.
Note: All pricing data is as of market close on March 13.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Freshworks Inc. (FRSH) the Best Nasdaq Stock Under $20 to Buy Now?
A close-up picture of a software engineer typing code on a laptop.
Freshworks Inc. (NASDAQ:FRSH) provides AI service software designed to enhance customer and employee experiences. It offers a software-as-a-service platform that allows small and medium-sized businesses to support customers through email, phone, website, and social networks. The company provides multi-product support, a knowledge base, self-service portal, community forums, and various tools to leverage mainstream social media for customer support.
Freshworks Inc. (NASDAQ:FRSH) reported strong Q4 2024 results on February 11. Revenue for the quarter increased by 22% year-over-year to $195 million. Adjusted EPS rose by 75% to $0.14 due to the expansion in operating margin to 20.7% from 7.2% in the same quarter of the previous year. Buoyed by the strong results, the company CEO noted:
“Companies are leaving legacy vendors and coming to Freshworks for our uncomplicated, modern employee and customer experience service solutions.”
Following the results, Needham analyst Scott Berg raised the price target from $20 to $25 and reiterated a Buy rating on Freshworks Inc. (NASDAQ:FRSH). According to the analyst, the company delivered strong Q4 results, with Device42 (its IT asset management subsidiary) contributing to higher win rates. However, foreign exchange (FX) pressures slightly impacted revenue and led to fewer large customer additions. Despite this, overall customer growth reached a four-year high, driven by a surge in free-to-paid conversions, boosting monetization.
Overall, FRSH ranks 8th on our list of best Nasdaq stocks under $20 to buy now. While we acknowledge the potential of FRSH to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FRSH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
