These are the under $20 stocks that are undervalued and poised for a strong reversal rally.
- Riot Platforms (RIOT): Big expansion plans will deliver robust cash flows if Bitcoin trends higher in the coming quarters.
- Kinross Gold (KGC): Positive outlook for gold with the company having high financial flexibility for aggressive growth.
- Archer Aviation (ACHR): Getting closer to the commercialization of electric vertical take-off and landing aircraft.
Low price stocks always catch the attention of investors with limited funds. A diversified portfolio can be created with these stocks. Of course, the necessary condition is low price stocks that have strong fundamentals. This column focuses on three under $20 stocks that are poised to double in the next 12 months.
It’s worth noting that the outlook for the market is positive for the next year. Citigroup (NYSE:C) believes that the S&P 500 index can potentially touch 5,000 levels in 2024. If this holds true, a big rally might be impending for growth stocks.
Therefore, it’s a good time to accumulate undervalued growth stocks under $20. I must mention that the stocks discussed are worth holding beyond the initial horizon of 12 months. These under $20 stocks can deliver multi-bagger returns in the long-term.
Let’s discuss the reasons to be bullish on these fundamentally strong under $20 stocks.
Riot Platforms (RIOT)
Riot Platforms (NASDAQ:RIOT) stock has corrected from year-to-date highs of $20.3 to current levels of $10.2. However, RIOT stock is still higher by 210% for the year. After a massive correction in the last two months, I believe that the stock is poised for a reversal rally. I see the stock easily doubling within the next 12 months.
The recent correction in RIOT stock has been triggered by downside in Bitcoin (BTC-USD). I however believe that the outlook for the digital asset is positive in the coming quarters. With Bitcoin halving due next year, a strong rally is impending. This will support the upside thesis for RIOT stock.
Specific to Riot, visibility for robust growth is a reason to be bullish. The company reported mining capacity of 10.7EH/s as of Q2 2023. Riot expects to boost capacity to 20.1EH/s by Q2 2024 and further to 35.4EH/s by 2025. This will translate into strong growth in revenue and cash flow if Bitcoin trends higher. I also like the fact that Riot is debt free. Further, with $510 million in cash and digital assets, there is ample flexibility to pursue aggressive growth.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) stock has trended higher by 37% in the last 12 months. The stock however remains attractively valued at a forward price-earnings ratio of 12. Further, KGC stock offers a dividend yield of 2.5% and I believe that healthy dividend growth is likely.
The first reason to be bullish is a positive outlook for gold. JPMorgan Chase (NYSE:JPM) expects gold price to touch new highs in 2024 with potential rate cut being the catalyst. If this holds true, Kinross will benefit as free cash flow swells.
To put things into perspective, Kinross reported operating cash flow of $788 million for the first half of 2023. This would already imply an annualized OCF potential of $1.6 billion. If gold trades well above $2,000 an ounce, Kinross can deliver OCF of $2 to $2.5 billion.
I must add that the company reported a liquidity buffer of $1.9 billion as of Q2 2023. With high financial flexibility, the company is positioned for opportunistic acquisitions to boost production growth visibility.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) stock has skyrocketed by 237% for year-to-date. The rally from oversold levels is likely to sustain on strong business developments for this flying car stock.
As an overview, Archer Aviation is working towards the commercialization of electric vertical take-off and landing aircraft. In August, the company received all certifications from the Federal Aviation Administration to begin flight test operations. This is a big step towards potential commercialization within the next 24 months.
It’s worth noting that the company has received financing from the likes of Stellantis (NYSE:STLA), Boeing (NYSE:BA), and United Airlines (NASDAQ:UAL). With this funding round, the company has boosted its liquidity profile to $1.1 billion. Importantly, the investment by blue-chip companies underscores the potential the company holds.
Archer already has contracts worth $142 million with the U.S. Air Force. As the company nears commercialization, I expect the backlog to swell, which will be a catalyst for stock upside.
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