We recently compiled a list of 13 Best Growth Stocks Under $10 to Buy. In this article we will look at where Viavi Solutions Inc. (NASDAQ:VIAV) ranks among the best growth stocks under $10 to buy.
After a summer dip, stocks recovered in Q3 2024, setting new records after the quarter. More than 60% of the 500 largest companies’ components outperformed the overall index that covers these stocks in the quarter. The index that tracks the 500 largest companies traded in the US is up more than 20% year-to-date, at record-high levels. Bonds also fared well, helped by declining inflation and the Federal Reserve’s aggressive half-percentage-point drop, which indicated a move away from combating inflation and toward promoting growth. Fed rate reductions boost small-cap companies, industries, and regional banks.
Value and small-cap companies overtook large tech in the major rotation that occurred during the general stock market rally. Subsequently, expensive large-cap growth names lost investor attention, while previously underperforming markets saw strong gains. The consolidation of technology is a positive development, according to King Lip, chief strategist at BakerAvenue Wealth Management. He states that ” “We’re not in a bear market for tech by any means. But you’ve definitely seen some evidence of rotation.”
Nonetheless, in Q3 2024, eight of the 500 largest companies’ eleven sectors outperformed the broader index of these 500 companies. According to Tajinder Dhillon, senior research analyst at LSEG, the Magnificent Seven companies are predicted to raise earnings by almost 20% in the third quarter of 2024, compared with a profit rise of 2.5% for the rest of the 500 largest companies. That disparity is predicted to diminish in 2025, with the remainder of the index expected to raise earnings by 14% for the full year against a 19% rise for the mega-cap group.
The Magnificent Seven “should not have to carry the profit rebound alone,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in recent research, providing a soft landing scenario. ” “For the soft landing, we are in the ‘show me’ stage.”
Moreover, soft employment figures helped allay concerns about a recession and modest inflation. Even though the unemployment rate has increased, the overall economic trend points to strong, albeit sluggish, growth. The market is now even more optimistic due to the Fed’s aggressive rate decrease and the likelihood of future rate reductions.
It is anticipated by Morningstar analysts that the “great rotation” away from large-cap tech stocks would continue as Q4 approaches, presenting opportunities in undervalued industries. The financial services, real estate, energy, and healthcare industries are expected to grow as per Morningstar analysts, particularly with the current decline in interest rates.
According to Morningstar analysts, going ahead, the possibility of additional rate cuts and higher government expenditure in this election year should boost markets, but prudence is still advised because lower-income people are still being negatively impacted by continued inflationary pressures. Value stocks and industries with strong prospects for future recovery should be the main focus of investors.
Methodology:
We sifted through holdings of iShares Morningstar Small-Cap Growth ETF to form an initial list of 20 highest-weighted Growth Stocks Under $10 in the ETF. Then we selected the 13 stocks that were the most popular among hedge funds as of Q2, 2024. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stocks’ current market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Viavi Solutions Inc. (NASDAQ:VIAV)
Number of Hedge Fund Investors: 21
A biotechnology startup in the development stage, Viavi Solutions Inc. (NASDAQ:VIAV) is dedicated to creating small-molecule medications that address metabolic and cardiovascular conditions.
The company’s net revenue for Q4 2024 was $252 million, in line with its projection, and a 2.4% sequential gain but a 4.4% YoY decline. However, revenue for the Optical Security and Performance (OSP) segment rose 6.2% YoY.
Viavi’s earnings per share for Q4 2024 were $0.08, above the upper end of the guidance range, and its operating margin was 10.9%, above the midpoint of the company’s guidance.
A reorganization plan has also been started by the firm, with the goal of achieving annualized cost reductions of about $25 million by the end of the fiscal year 2025. The company projects revenue for the first quarter of fiscal 2025 to be between $235 million and $245 million.
Stifel maintained a Buy rating on the Viavi Solutions Inc. (NASDAQ:VIAV) shares and dropped the company’s price target from $13 to $10.50. Analysts note that industry-wide demand headaches persist and believe this could continue to weigh on medium-term results, even though the firm expects June quarter results in line to slightly above estimates and believes Viavi is well-positioned to take advantage of end demand recovery tailwinds.
Glenn Russell Dubin’s Highbridge Capital Management is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 41,500,000 shares worth $39.39 million as of Q2.
Overall VIAV ranks 11th on our list of Best Growth Stocks Under $10 to Buy. While we acknowledge the potential of VIAV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VIAV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.