It can be intimidating to invest in the tech sector's top stocks, which often cost hundreds to thousands of dollars for a single share. Most brokerages make it easier to invest in those stocks through fractional shares, but some investors might still prefer to buy even lots of 100 shares, which are easier to track or use for covered calls.
Investors should remember that a stock's trading price never defines how cheap or expensive it actually is. For example, a stock that trades at a single-digit price with a triple-digit price-to-earnings ratio is still usually more expensive than a stock that trades at a triple-digit price with a single-digit price-to-earnings ratio.
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That said, stocks that trade at less than $20 a share might still be considered more manageable than higher-priced stocks. So today, we'll take a closer look at three promising tech stocks that trade under that threshold: the solid-state battery maker QuantumScape(NYSE: QS), the Taiwanese contract chipmaker United Microelectronics(NYSE: UMC), and the Bitcoin miner Marathon Digital (NASDAQ: MARA).
1. QuantumScape
QuantumScape produces solid-state batteries that are powered by solid electrolytes instead of the liquid electrolytes used in lithium-ion batteries. Solid-state batteries are generally less volatile, more resistant to high temperatures, less susceptible to leaks and fires, and can charge faster than lithium-ion batteries.
QuantumScape is developing solid-state batteries for the electric vehicle (EV) market that can be fully charged in less than 15 minutes and have a range of 400-500 miles. Those batteries could potentially replace traditional lithium-ion batteries for EVs, which require roughly 30 minutes to charge for a range of approximately 300 miles.
QuantumScape hasn't commercialized any of its batteries nor generated any meaningful revenue yet, but its biggest backer is Volkswagen. It's gradually shipping its first samples this year, and analysts expect it to generate just $2 million in revenue in 2024 and $15 million in revenue in 2025.
That doesn't seem like a lot of revenue for a company with an enterprise value of $2.5 billion, but QuantumScape's revenue could skyrocket over the next decade as automakers switch to solid-state batteries. If you believe QuantumScape will remain a major player in this nascent market, then it could be a great buy at $7 a share.
2. United Microelectronics
United Microelectronics, better known as UMC, is Taiwan's second-largest contract chipmaker after Taiwan Semiconductor Manufacturing. It's often overshadowed by TSMC because it manufactures larger, older, and cheaper chips -- but it's still a crucial cog in the global semiconductor supply chain.
UMC stopped chasing TSMC in the pricey "process race" to manufacture smaller, denser, and more power-efficient chips in 2018. After that shift, it produced chips for lower-end mobile devices, connected cars, industrial machines, and Internet of Things gadgets. From 2018 to 2023, it grew its revenue at a stable compound annual growth rate (CAGR) of 8%. Its operating margin expanded from 4% to 26%, while its earnings per share (EPS) increased at a CAGR of 53%.
That explosive earnings growth suggests that UMC made the right move by pivoting toward older and cheaper chips. For 2024, analysts expect its revenue to grow 8% as higher expenses and lower utilization rates reduce its EPS by 19%. That cyclical slowdown isn't surprising, but its stock still looks cheap at 12 times next year's earnings and pays a hefty forward yield of 7.3%. At $8 per share, it might be more appealing to retail investors than TSMC -- which still trades at about $125.
3. Marathon Digital
Marathon Digital is the world's largest pure-play Bitcoin miner. It had energized a fleet of approximately 212,900 Bitcoin miners at the end of January, and it produced an average of 35 Bitcoin daily throughout the entire month. Marathon consistently adds that Bitcoin to its own balance sheet while selling some of those holdings to raise extra cash.
That cash flow growth enabled it to open two new plants, launch a mining joint venture in Abu Dhabi, and buy several other mining sites over the past year. However, it still ended January with $989 million in cash, cash equivalents, and Bitcoin -- which puts it in a strong position to further consolidate the mining market.
However, Marathon's growth is still tightly tethered to Bitcoin's volatile price, which nearly doubled over the past 12 months after enduring some wild swings. Analysts expect its revenue to grow at a CAGR of 55% from 2023 to 2025, as Bitcoin's price bounces back and it scales up its mining operations. So if you believe Bitcoin's price will keep rising, Marathon's stock could be a bargain at just 5 times next year's sales -- and it trades just under the $20 threshold at about $18 as of this writing.
Should you invest $1,000 in QuantumScape right now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Taiwan Semiconductor Manufacturing, and Volkswagen Ag. The Motley Fool has a disclosure policy.
