One of the good things about equity markets is that investors can get started on a budget. With $20 or less, it’s possible to invest in companies with decent prospects. Let’s consider three such stocks: Rivian Automotive(NASDAQ: RIVN), SoFi Technologies(NASDAQ: SOFI), and Adyen(OTC: ADYEY). They have faced challenges recently, but at under $20 per share, these companies are worth a second look.
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1. Rivian
Rivian has underperformed broader equities this year, partly due to slowing demand in the electric vehicle (EV) market. EV sales in the first quarter dropped by 27% year over year in the U.S. Even though Rivian’s financial results for the period were pretty strong — its revenue climbed 11% year over year to $1.4 billion — the weakness in the EV sector could eventually significantly harm its sales. However, Rivian is entering an important period. The company is launching its mass-market model, the R2, with a much more approachable starting price than previous models.
Rivian is also working hard to achieve level 4 autonomy with the R2, a stage at which cars can drive themselves within certain geographical limits and without human supervision. Rivian entered into a deal with Uber Technologies to deploy up to 50,000 autonomous robotaxis in various U.S. cities starting in 2028. Getting to level 4 will be instrumental for Rivian to meet its end of the deal.
Provided it can achieve that goal while securing a decent share of the midsize SUV market with its new R2, the company’s shares could soar. That said, a lot could go wrong that would lead to a sinking stock price: failure to reach level 4 autonomy, weaker demand for its EVs, and its R2 model could flop. There is a wide range of potential outcomes here, and investors should keep that in mind before pulling the trigger. Even at just about $17 per share, Rivian looks like a high-risk, high-reward play.
2. SoFi Technologies
It’s been a terrible year for SoFi Technologies. The fintech specialist has had to deal with poor financial results and a short-seller report that sank its stock price. On top of that, the stock still trades at 28.3x forward earnings, which is well above the 14.5x average for financial stocks. SoFi is also on the riskier side, and investors should expect significant volatility going forward. However, the stock might deliver strong returns over the next decade. Here are three reasons why.
First, SoFi’s entirely online model arguably gives it an advantage, allowing it to save on overhead costs and pass those savings on to customers. SoFi isn’t the only bank with this model. Still, it was a pioneer in the niche and has arguably built name recognition and familiarity with its original target market: relatively young high earners. Second, despite unimpressive financial results this year, SoFi Technologies continues to expand its ecosystem, with growing memberships and products under its belt.
Third, SoFi could build a moat from switching costs as its members rely on it more and more for a range of financial services. If it can establish itself as the bank of the future and continue to attract younger customers who are still early in their financial journeys, there might be market-beating days ahead for the stock.
3. Adyen
Adyen, a fintech leader that combines payment gateways, payment processing, and risk management services on a single integrated platform, continues to disappoint. The company’s latest financial results and guidance were unimpressive, leading to a sell-off. However, Adyen remains a leader in its niche, with a large, established clientele, including major multinational corporations such as Uber, Spotify, and others.
Broader economic problems may continue to weigh on the business over the short run, but Adyen is well-positioned to capitalize on the growing demand for digital payments over the long run that will result from various changes, such as the continued growth of e-commerce. Adyen also benefits from a competitive edge, notably due to high switching costs, as its clients rely on its services for day-to-day operations and risk business disruptions if they switch. Adyen’s U.S. ADR (American Depositary Receipts) shares trade around $11. At these levels, and despite Adyen’s recent challenges, the stock might be a great buy, given its position in the fintech market and the industry’s long-term outlook.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adyen, Spotify Technology, and Uber Technologies. The Motley Fool has a disclosure policy.
