8 Best Cheap Stocks to Buy Under $10

At less than $10 per share, these stocks won't break the bank.

The S&P 500 is off to a shaky start in 2022, but the market remains near all-time highs after almost doubling from its March 2020 lows. At this point, quality stocks trading for less than $10 per share are few and far between. Stocks priced at this level can be a red flag for investors that something serious is wrong with a company, such as untenable business models or difficult near-term outlooks. However, the Morningstar analyst team has identified eight cheap, high-quality stocks that could be excellent buying opportunities for frugal investors. Here are eight cheap stocks to buy for under $10, according to Morningstar.

Banco Santander SA (ticker: SAN)

Banco Santander is a large Spanish bank with a sizable international presence. Analyst Johann Scholtz says Santander should exit its underperforming U.S. and U.K. retail banking businesses and use the proceeds to improve its balance sheet. In addition, Scholtz says Santander should focus more on its Latin American business, which has generated at least high double-digit returns on equity in recent quarters. Scholtz says Santander also has competitive advantages in the high-growth markets of Brazil, Chile and Mexico. Morningstar has a "buy" rating and a $4.50 price target for SAN stock, which closed at $3.52 on Jan. 20.

Lloyd's Banking Group PLC (LYG)

Lloyd's Banking Group is a diversified bank and insurance provider based in the U.K. Analyst Niklas Kammer says Lloyd's appears to be adequately capitalized after passing the Bank of England's stress test in December. Lloyd's underwent a major restructuring in 2011, and Kammer says the reformed company is now a low-risk play on British retail and commercial banking. Unfortunately, mortgage pricing is under pressure in the U.K. in a fiercely competitive environment, and mortgage loans represent about two-thirds of Lloyd's customer lending. But Kammer says the company prioritizes margins over volume and has shifted focus to financial planning products, credit card debt and business loans. Morningstar has a "buy" rating and a $3.70 price target for LYG stock, which closed at $2.82 on Jan. 20.

BBVA SA (BBVA)

BBVA is the third-largest bank in Spain and has international operations in Latin America. Scholtz says the sell-off in BBVA shares since it announced a full acquisition of Turkish subsidiary Garanti in November suggests the market assigns no value to Garanti. Scholtz says BBVA is getting an excellent price on a quality bank that BBVA "knows inside out." He says the deal will boost BBVA earnings by 14% and increase its return on equity. Morningstar has a "buy" rating and a $7.30 fair value estimate for BBVA stock, which closed at $6.37 on Jan. 20.

Banco Bradesco SA (BBD)

Banco Bradesco is one of Brazil's largest banks. Analyst Michael Miller says the stock has been weighed down by macroeconomic uncertainty in Brazil, including the country's growing pension obligations. Miller says Bradesco generated impressive loan growth in 2021, but Brazil's economy is currently struggling with high inflation. While Bradesco's net interest margins could improve as interest rates rise, Miller says there is also a risk that rapidly rising rates could hinder loan growth and increase credit risk for Bradesco. Morningstar has a "buy" rating and a $4.20 fair value estimate for BBD stock, which closed at $3.85 on Jan. 20.

Energy Transfer LP (ET)

Energy Transfer provides U.S. midstream oil and gas infrastructure. Analyst Stephen Ellis says Energy Transfer is dialing back growth investments to around $600 million annually through 2023, down from its $8 billion high point. Ellis says the company will shift focus to improving its balance sheet with the goal of returning to distribution growth and buybacks, possibly by the end of 2022. Energy Transfer is also investing for the future via its alternative energy group. Morningstar has a "buy" rating and a $16.50 fair value estimate for ET stock, which closed at $9.53 on Jan. 20.

Telefonica SA (TEF)

Telefonica is the largest Spanish telecom company. Analyst Javier Correonero says Telefonica has the best fiber-to-the-home network in Spain, and its proprietary content and football rights generate a 65% higher convergent average revenue per user than competitor Orange SA (ORAN). Telefonica continues to reduce its Latin American footprint, and Correonero says the company has had an excellent commercial strategy in Germany that does not involve price cuts. The company's ongoing asset sales have also helped Telefonica reduce net debt. Morningstar has a "buy" rating and a $5.80 price target for TEF stock, which closed at $4.45 on Jan. 20.

Sirius XM Holdings Inc. (SIRI)

Sirius XM Holdings is a leading provider of satellite and internet radio services. In the third quarter, Sirius XM reported a record 616,000 self-pay customer additions. Analyst Neil Macker says the company's 1.5 million customer additions over the previous four quarters are particularly impressive given the ongoing negative impact of the pandemic on the global travel industry. Macker says auto industry supply chain issues that have weighed on Sirius XM's paid promotional subscribers will likely improve throughout 2022. Morningstar has a "buy" rating and a $7.50 fair value estimate for SIRI stock, which closed at $6.04 on Jan. 20.

Nomura Holdings Inc. (NMR)

Nomura is Japan's largest independent investment bank and brokerage. Analyst Michael Makdad says Nomura has a valuable brand in Japan among high-net-worth customers. He says the company's international wholesale business has no clear advantages, however, and Nomura has more balance sheet risk than it needs to manage its Japanese business. Makdad says an aging core customer base creates long-term risk for Nomura if the company doesn't invest in more digital offerings to attract younger customers. Morningstar has a "buy" rating and a $5.45 price target for NMR stock, which closed at $4.42 on Jan. 20.

8 best cheap stocks to buy under $10:

Banco Santander SA (SAN) Lloyd's Banking Group PLC (LYG) BBVA SA (BBVA) Banco Bradesco SA (BBD) Energy Transfer LP (ET) Telefonica SA (TEF) Sirius XM Holdings Inc. (SIRI) Nomura Holdings Inc. (NMR)