Monday, June 17, 2024

2 Top Tech Stocks Trading Under $20 per Share


It’s not easy finding quality stocks trading under $20 per share. While share price isn’t the sole indicator of a stock’s merits, great companies tend to trade higher over time, so they typically don’t stay this inexpensive for very long.

However, there are exceptions.

Believe it or not, some potentially great technology companies are trading at attractive prices that could look like bargains in hindsight. SentinelOne (NYSE: S) and Lemonade (NYSE: LMND) stand out as speculative stocks with enough promise to potentially make buyers look like geniuses in the long run.

Here is the pitch for each stock today.

1. SentinelOne: A rising star in AI and cybersecurity

SentinelOne stock keeps sliding lower in price despite continuing proof that the business is growing stronger. Cybersecurity is a competitive field, but SentinelOne stands out with its artificial intelligence (AI)-powered Singularity platform, which proactively identifies and deals with potential threats. Shares trade down a whopping 77% from their high, but this is not a dead company. In fact, it’s more the opposite.

The company recently reported Q1 earnings for its fiscal year 2025 and posted 40% year-over-year revenue growth. Additionally, the company is making tremendous strides toward becoming a profitable business. SentinelOne posted its first quarter of substantial free cash flow, converting 18% of revenue. Last year? The free cash flow margin was negative 24% in Q1. That’s a 42percentage-point jump in 12 months. Turning cash-flow positive will add money to the $1.1 billion pile on its balance sheet and put GAAP profit next on the docket.

S Free Cash Flow (Quarterly) Chart

S Free Cash Flow (Quarterly) Chart

SentinelOne’s enterprise value is just $4.5 billion at this depressed share price, with an enterprise-value-to-revenue ratio of just 5.5. For context, arch-rival CrowdStrike trades at a much hotter 18 times revenue. One could argue that CrowdStrike’s larger size, similar growth, and better financial metrics earn it a premium, but should the gap be this wide? Those who buy SentinelOne may see good long-term investment returns from here if it continues delivering on its potential.

2. Lemonade: The company reinventing insurance

Lemonade is the new kid on the block in the insurance industry. It’s gotten its foot in the door of a challenging market by doing things differently. Instead of a network of agents customers must call, Lemonade uses AI-powered chatbots to interact with customers. You can buy a policy or file a claim with Lemonade in as little as 90 seconds. Additionally, Lemonade caps what it makes on premiums and donates excess profits to charity. These differences have created a company that users want to do business with.

The company’s customer base is rapidly growing; nearly 2.1 million people use Lemonade, up 13% year over year in Q1. Lemonade is slowly expanding its product offerings, including Renters, Homeowners, Car, Pet, and Life insurance. Combining customer growth and cross-selling opportunities could drive solid revenue growth for years.

Meanwhile, Lemonade is financially improving as well. Losses are shrinking as the company grows, and management now expects cash flow to break even by the middle of this year. Meanwhile, Lemonade remains flush with cash; there is still $927 million in cash and investments.

LMND Price to Book Value Chart

LMND Price to Book Value Chart

This significant milestone is approaching as the stock trades over 90% off its high. The chart above clearly shows that Lemonade was caught in a valuation bubble in 2021. An insurance company should never trade anywhere close to 15 times book value. Today, it’s similarly clear that the froth has mostly left the stock. Investors have a real shot at capturing significant investment returns over time as Lemonade grows.

Should you invest $1,000 in SentinelOne right now?

Before you buy stock in SentinelOne, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SentinelOne wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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*Stock Advisor returns as of June 3, 2024

Justin Pope has positions in SentinelOne. The Motley Fool has positions in and recommends CrowdStrike and Lemonade. The Motley Fool has a disclosure policy.

2 Top Tech Stocks Trading Under $20 per Share was originally published by The Motley Fool



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