Low-priced stocks can often bring great investment values for investors. An undervalued company or one that is poised to make a big move can create nice returns. Let's look at Micron Technology (MU), Nokia (NOK) and Research In Motion (RIMM) to see if any of them has the potential to climb to $20 per share.
Micron Technology manufactures semiconductors and memory for mobile phones, MP3 players, computers, and more. Trading at less than $8 per share, the company definitely fits in our price range, and offers the potential to be a strong growth stock.
The company experienced a drop in share price and revenue last year due to weak prices in the memory market. Fortunately for Micron, the drop may be short-lived as its all-important NAND flash chips are a key component in tablets and smartphones.
Micron has a very low debt-to-equity standing, meaning that it should be able to make money without overspending. The company is currently working to redeem nearly $139 million in Convertible Senior Notes due to mature by 2013.
Its financial position is being affected not by past debt, but rather by a legal battle with Oracle (ORCL). Micron recently settled a lawsuit brought by its rival over an alleged conspiracy to raise DRAM prices while violating antitrust and unfair competition laws. The suit cost shareholders $58 million in the second quarter, in addition to an undisclosed amount in the third quarter. This uncertainty could undermine the stock price until everything is resolved.
The stock is already selling below its book price; the forecast offers the potential of a hefty 25% upside over the next 12 months. While it does not look like a $20 stock in the near future, this is still an excellent investment option.
Nokia is another company that is struggling with intense competition in its business sector. Once the dominant cell-phone manufacturer, Nokia was unable to keep up with the smartphone revolution, losing ground to the likes of Research In Motion, Apple (AAPL) and Google (GOOG). The company's value continues to tumble. Although it still sells the most phones worldwide, Nokia only holds about 1% of the smartphone market.
While it has gotten off to a slow start in this key sector, Nokia is trying to make its way back. The Nokia Lumina 900 is the company's most significant offering in smartphones. Featuring the highly acclaimed Windows 7 Mobile platform, the phone is to compete against the Apple's iOS and Google's Android software.
In spite of its problems, Nokia still offers some good potential for investors. After a 40% drop in share price last year, the new push in the smartphone market has the company looking at 50% upside for the next 12 months. In addition, Nokia is still paying a dividend yield of 3.6%; although that is down substantially from previous years, the company's low debt-to-equity ratio of 38 suggests that it can maintain its dividend going forward. With potential success in the market and solid financials, Nokia still has the ability to bring good returns.
Much like Micron, Nokia shares simply has too far to go to become a $20 stock in the near future. The good news for investors, however, is that it still has the potential to be a super pick for nearly any portfolio. An impressive yield, exciting upside potential, and an improving business climate all make Nokia a company to watch.
Research In Motion is another sub-$15 stock that interests me at this time. Once the dominant player in the smartphone industry, the company has been steamrolled by Apple and the iPhone. The defeat has been so devastating that Research In Motion was reported to have recently announced plans to leave the consumer market. While there are conflicting reports about the company's intentions, there is no disputing the competition been difficult for Research In Motion.
After failing to win over the consumer market with phones that focus on business customers, the company has decided to reconsider on its core business. Whether it completely leaves the consumer market or takes a targeted approach, the company says it will focus on the things it does well. I think this effort by Research In Motion can actually bring it back to relevance, helping investors to make money once again investing in the stock.
In April 2011, company stock was near $60, a price that would fall by more than 75% in the following 12 months. Now trading for less than $13 per share, I believe that Research In Motion stock is ready to climb, with some analysis models showing shares at nearly 50% below their market valuation.
There is support for this position, with a number of fundamentals pointing to better days ahead for the company. Research In Motion stock is priced well below both its book and sales numbers, and its price-to-earnings ratio is below six. The company is debt-free and has nearly $3 billion in operating cash flow.
The corporate decision to focus on business customers is well-founded. The company's solid approach has kept it in a position of prominence in the business world. Nearly half a million federal employees, including the president of the United States, carry a Blackberry. Research In Motion has also introduced its Mobile Fusion-RIM, a Blackberry OS that allows users to manage smartphones and tablets using not only its operating system, but also those on the Android OS and Apple's iOS.
I think Research In Motion is a play that could be too tempting to pass up. The company's stock appears to have bottomed out, and it appears as if Blackberry will get a boost in interest from consumers and businesses. Its undervalued status will likely entice investors in Research In Motion to take new positions. While it did not succeed in the tablet market or consumer smartphones, the Blackberry is ideal for its loyal following of business customers. This provides the company with a great economic moat, and I believe it has the potential to make the $20 level within the next 12 to 18 months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.