3 Cheap Stocks to Buy for Second Half Growth Despite COVID-19 Uncertainty

U.S. stocks opened lower Thursday in what has been an up and down week, as investors try to weigh some better-than-expected earnings results against continued macroeconomic uncertainty. Apple AAPL, Amazon AMZN, Facebook FB, and Google parent Alphabet GOOGL will all grab the spotlight Thursday afternoon, one day after facing further antitrust probes in Washington.

Thursday morning also saw initial second quarter GDP data roll in that was brutal, but slightly better than expected. The U.S. economy shrank by 32.9% in Q2, based on initial Commerce Department estimates. This likely marks the bottom of the economic downturn since it features what will hopefully be the period with the most stringent lockdown measures.

Therefore, Wall Street might shake this figure off sooner than later, as people knew the second quarter was going to be rough. And this could slam home why many might remain in don’t fight the Fed mode, after Jerome Powell said Wednesday that it would continue to do all it can to support the U.S. economy.

Yet, with short-term interest rates near zero and long-term rates floating around all-time lows, the Fed chairman noted that more fiscal policy efforts are needed. This could put greater pressure on Congress to hammer out a second stimulus bill.

Despite the broader unknowns and a possible near-term pullback from tech and elsewhere, as Wall Street uses earnings as a chance to take home profits—like they did with Microsoft MSFT—investors should still be on the hunt for strong stocks to buy or add to their watchlists. And it’s worth noting that the second half earnings picture is slowly improving (also read: An Improving Earnings Outlook Despite Covid-19 Concerns)

With this in mind, let’s dive into three“cheap” stocks that are trading for under $20 per share that appear strong at the moment…

Digital Turbine, Inc. APPS

Prior Close: $12.52 USD

Digital Turbine works to connect OEMs, mobile operators, and publishers with advertisers and developers for “frictionless app and content discovery, user acquisition and engagement, operational efficiency and monetization opportunities.” The Austin, Texas-based firm has landed on Deloitte’s Technology Fast 500 list multiple times and it completed in early March its acquisition of Mobile Posse.

The deal helps create a more robust offering for clients, by adding Mobile Posse’s “suite of highly-engaging content discovery products” to its portfolio. The firm’s Q4 FY20 revenue, which it posted in early June, jumped 45%, with full-year sales up 34%. This performance came on top of the year-ago period’s 39% sales growth and was mostly organic since it only included a month of Mobile Posse operations.

APPS has climbed from under $2 in the fall of 2018 to its current price of $12.50 a share. This includes its 215% jump from the market’s March 23 lows, which destroys its industry’s 55% climb. Along with its cheap price tag, Digital Turbine trades at a solid discount compared to its industry, as it has for the last several years.

Our Zacks estimates call for APPS Q1 sales to surge 59%, with FY21 projected to come in 52% higher. Meanwhile, its adjusted earnings are projected to surge 80% in Q1 and 100% for the year to reach $0.40 a share. Digital Turbine operates within a booming market and it earns a Zacks Rank #2 (Buy) right now, alongside its “B” grade for Growth in our Style Scores system. The content discovery and delivery firm is set to report its Q1 results on August 5.  

Zix Corporation ZIXI

Prior Close: $6.73 USD

Zix is an email security firm that specializes in email encryption, data loss and threat protection, and other cybersecurity offerings. ZIXI stock is up over 100% since the market’s lows. Despite the climb, the stock hovers 30% below its July 2019 highs, which could give it far more room to run if it’s able to impress Wall Street with its second quarter 2020 results that are due out on August 5. Along with its cheap shares, Zix trades at a significant discount against its industry at the moment, at 1.7X forward 12-month sales vs. 7.1X.

Peeking ahead, ZIXI’s second quarter revenue is projected to jump 14.4%, with its FY20 sales expected to climb over 23%. Better still, ZIXI’s adjusted quarterly earnings are expected to surge over 27%, with its full-year EPS figure set to soar 138% to $0.57 a share.

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