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3 Tech Stocks Under $10 Wall Street Predicts Will Rally by 40% or More

Even though investors have of late rotated away from expensive tech stocks on concerns over the potential tightening of monetary policy and rising Treasury yields, we believe low-priced tech stocks NeoPhotonics (NPTN), Zix (ZIXI), and Pixelworks (PXLW) could be good additions to one’s watchlist now given the tech industry’s solid growth prospects amid fast-paced, global digitization. Indeed, Wall Street analysts expect these stocks to rally by more than 40% in price in the near term. So, let’s take a closer look at these names.

Last week, the tech-heavy Nasdaq plunged, led by a decline in large tech stocks, including Facebook, Inc. (FB) and Apple Inc. (AAPL). However, according to a CNBC report, "tech weakness is a major buying opportunity for investors." Moreover, Invesco’s Kristina Hooper said, “Technology over the longer term is going to benefit from increased corporate spending.”

According to a Forrester report, U.S. tech spending is expected to grow by 6% this year and 6.8% next year, which should help the tech industry grow further. The industry is also expected to grow due to consistent innovations in advanced technologies that are applicable across several industries.

Wall Street analysts expect tech stocks NeoPhotonics Corporation (NPTN), Zix Corporation (ZIXI), and Pixelworks, Inc. (PXLW)—which are priced below  $10 per share—to rally by more than 40% in the coming months. So, we think it could be wise to add these stocks to one’s watchlist.

NeoPhotonics Corporation (NPTN)

NPTN manufactures and sells optoelectronic products that transmit and receive high-speed digital optical signals for cloud and hyper-scale data-center internet content providers and telecom networks worldwide. The San Jose, Calif., concern’s offerings include pluggable coherent transceivers and multicast switching solutions.

On September 8, 2021, NPTN launched its CFP2-DCO Module with zero dBm Optical Output Power. Tim Jenks, NPTN’s Chairman and CEO, said, “Our newest CFP2-DCO coherent pluggable module, with high output power, robust ROADM filtering tolerance and demonstrated transmission over 1500 km, allows customers to use one coherent pluggable solution to cover essentially all metro ROADM use cases, simplifying network design, enabling disaggregation, and lowering inventory costs.”

NPTN’s revenue increased 6.7% sequentially to $65.01 million for its fiscal second quarter, ended June 30, 2021. The company’s interest income came in at $140,000, up 536.4% year-over-year. Its non-GAAP gross profit came in at $14.13 million, up 3.4% sequentially.

For its fiscal year 2022, analysts expect NPTN’s revenue to be $378.90 million, representing a 26.2% year-over-year rise. In addition, the company’s EPS is expected to increase 188.2% year-over-year to $0.30 in the next year. In addition, it surpassed the Street’s EPS estimates in three of the trailing four quarters.

Wall Street analysts expect the stock to hit $14.20 in price in the near term, which indicates a potential 61% upside.

Zix Corporation (ZIXI)

ZIXI provides solutions for email encryption, data loss prevention, threat protection, unified archiving, and cloud data backup in the USA, Israel, Canada, the U.K., and Switzerland. The Dallas, Tex., company offers Advanced Email Threat Protection, which is a cloud-based service that defends organizations from zero-day malware, ransomware, phishing, and other spam.

On September 21, ZIXI launched its Secure Large File add-on for Zix Email Encryption. ZIXI CEO Dave Wagner said, “With the announcement of this new offering, we are excited to be able to help our customers and partners empower users with an intuitive way to send and receive large files via email securely. There is no additional infrastructure to deploy or maintain, which means users can simply log in using their existing Secure Messaging Portal credentials.”

For its fiscal second quarter, ended June 30, 2021, ZIXI’s revenue increased 17.8% year-over-year to $62.83 million. The company’s gross profit came in at $28.23 million, up 11.1% year-over-year. Its cash and cash equivalents were $33.9 million for the six months ended June 30, 2021, versus $14.06 million in the year-ago period.

ZIXI’s revenue is expected to come in at $288.04 million in its fiscal year 2022, representing a 13.6% year-over-year rise. Its EPS is also expected to grow 13.6% to $0.67 in the next year.

Wall Street analysts expect the stock to hit $10.75 in price in the near term, which indicates a potential 44.3% upside.

Pixelworks, Inc. (PXLW)

PXLW develops and markets semiconductor and software solutions such as video display processor products that comprise image processor ICs. The San Jose, Calif., company has an intellectual property portfolio of 338 patents related to the visual display of digital image data.

On August 10, 2021, PXLW transformed its Shanghai R&D center into a profit center. Todd DeBonis, the President and CEO of PXLW, said, “This will enable us to enhance the focus of our mobile, projector, and video delivery businesses on their global center in Asia, increasing our ability to access capital, ecosystem partners, customers, and key talent.”

PXLW’s revenues increased 51.6% sequentially to $14.05 million in the second quarter, ended June 30, 2021. Its gross profit came in at $7.11 million for the period ended June 30, 2021, up 90.9% sequentially. Also, its non-GAAP gross profit margin was 52.7% compared to 43.7% in the previous quarter. Furthermore, its non-GAAP net loss was $2.6 million, compared to $6.36 million in the prior year’s quarter.

Analysts expect PXLW’s revenue to grow 31.3% year-over-year to $70.43 million in its fiscal year 2022. Its EPS is expected to grow 51.9% next year.

Wall Street analysts expect the stock to hit $8 in price in the near term, which indicates a potential 83.9% upside.

NPTN shares were trading at $9.35 per share on Thursday morning, up $0.13 (+1.41%). Year-to-date, NPTN has gained 2.86%, versus a 19.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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