4 Companies Trading Under $5 That Could Double

Includes: COOL, EGHT, S, SIRI
by: Brian Nichols

The recent market selloff has resulted in most stocks being oversold. Almost every company has been affected over the last month with a declining stock price. The companies that I will discuss have been affected by the strong selling within the market. These stocks are presenting prices that I believe have the potential to double over the next 12 months.

Sirius XM (NASDAQ:SIRI) is directly affected by the fast growing automobile industry. The service comes standard in the majority of American made vehicles for a trial period. The stock has continued to post better earnings over the last 4 years with 2011 on pace to continue the trend.

Below is a chart of the company's recent quarterly results:

During the first two quarters of 2011 the company has posted higher revenue along with higher net income. The company has already exceeded net income for 2010 during the first two quarters of 2011. Net Income was affected after the company had unusual expenses during the 4th quarter of 2010. As the auto market continues to improve SIRI should reap the benefits and turn more revenue into profits.

The stock has been strongly affected by the declining markets. Since July 22 the stock has lost nearly 23% of its value and is currently trading at $1.69. During this time period there were no discouraging developments but rather strong earnings which are reflected in the above chart. The company has lifted its subscriber guidance, is retaining at a higher rate, increasing revenue, and is set to unveil a new product. Yet the stock has declined more than 20%. I believe there is a legitimate chance this stock could be trading over $3.50 by August 2012 as earnings and excitement continue to increase.

8x8 Inc (NASDAQ:EGHT) has rewarded investors with full year gains of more than 180%. The company has focused on improving its communication division with the success of VOIP. The company has several great services which include its virtual room. In this virtual room customers can communicate from any location with up to 20 participants. The company's focus is on business communication with a variety of successful services.

The company's income statement show a great level of improvement during 2010. The company's revenue, income, and EPS all significantly increased last year. This year the company is on pace to outperform last years results. EGHT is a small company but is growing at a rapid rate. The company has increased its assets each of the last 4 years with no debt on its balance sheet.

Despite strong yearly earnings and the recent record earnings report the company has lost more than 15% since July 20. The stock has begun trending higher gaining more than 30% during the last week as the company's optimistic future encouraged investors during a time of uncertainty. This stock is currently priced at $4.20 but I believe it will reach a price over $10 by August 2012 because of its accelerated growth, large assets, no debt, and solid innovating products.

Majesco Entertainment Company (NASDAQ:COOL) has lost 50% of its value during the last 2 months. The stock is has now began trending upward with gains of nearly 40% since August 9th. The company is a leading developer, provider, distributor of video games. The stock experienced unbelievable gains throughout 2010 when it released several best selling video games which include Zumba.

The large gains the stock has recently experienced have been a result of the company announcing the release of Zumba 2 and Parking Wars 2 on Facebook. Both games have been catalyst for the company's growth and the company expects the new and improved versions to surpass the sales of the originals. The company has no debt and is on pace to significantly outperform 2010.

I expect these two games to produce a large amount of revenue that will result in 2012 being much better than 2010 and 2011. The stock is currently trading at $2.37, and rising, I expect the company to reach over $6 by August 2012 a $1.50 gain over the company's 52 week high because of strong sales from the company's new games.

Sprint Nextel Corporation (NYSE:S) is a company that I am hesitant to place on this list. The stock has lost nearly 40% during the last month as earnings posted yet another loss adding to its streak of more than 15 consecutive quarters.

The company's balance sheet should be used as an example of what not to purchase. It has consistently decreased assets with little impact on debt raising the percentage of debt to assets year over year. However, at a price of $3.20 I believe the stock could potentially double by August 2012. The reason I believe the stock may double is because of the iPhone 5.

Sprint recently announced that it would be selling the iPhone 5 which will significantly increase revenue. The company posted a loss of nearly $3.5 billion in 2010. I believe the sales of the iPhone 5 will exceed $3.5 billion in additional revenue, which may not result in profitability but should close the gap. Sprint now has the opportunity to compete with AT&T and Verizon with equal opportunities.

Sprint's biggest problem will be cost and managing the expense to close the gap of net loss. I have no doubt that Sprint will spend a large sum of money in marketing to inform consumers of its new iPhone services. This expense along with increased operating costs from additional revenue is why I believe the company will not achieve profitability.

However, the company will still post much greater revenue therefore investors will view this as progress and the stock will be rewarded. At $3.20 there is no reason the stock should not see $6.40 by August 2012 if the company experiences success from the iPhone 5.

Disclosure: I am long COOL, EGHT. I may initiate a long position in SIRI during the next 72 hours.