The Smartest Cheap Stocks to Buy With $1,000 Right Now

Finding genuinely cheap stocks in a pricey stock market can be tough. Some stocks may look cheap based on standard valuation metrics, but they're anything but once you factor in their growth prospects. Other stocks may look expensive on the surface, but their long-term potential makes them bargains.

Two stocks that look cheap are telecom giant AT&T (NYSE: T) and video game engine developer Unity (NYSE: U). Here's why value-conscious investors with $1,000 to invest should consider buying both.

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Winning subscribers and buying back shares

Shares of AT&T have been soaring over the past 18 months. Since bottoming out in July 023, the stock has gained an impressive 65%. That's well ahead of the S&P 500 during the same period.

Despite the big rally, AT&T stock remains incredibly cheap. Based on the company's guidance for 2025, shares trade for about 10 times free cash . Free cash flow is expected to come in at around $16 billion this year and then grow by $1 annually through 2027.

AT&T stock has been cheap for years, so why is the stock only now booming? One reason is that the company has fully exited the media business following a string of disastrous and expensive acquisitions. With the pending sale of its remaining stake in DirecTV, AT&T is once again a pure telecom company focused on growing its wireless and fiber internet businesses.

With renewed focus, AT&T has been consistently winning subscribers. In the wireless business, the company has recorded at least 350,000 net postpaid phone subscribers each quarter for the past two years, and churn has been trending downward to historically low levels. In the fiber business, AT&T has been adding at least 200,000 subscribers each quarter as it pushes to expand its fiber network to pass 50 million locations by the end of 2029. With the recent rollout of a customer-friendly program to provide bill credits for outages, a first in the industry, AT&T is looking to keep its subscriber base growing without needing to resort to expensive promotions.

AT&T has been working to pay down debt, and it's now made enough progress to restart its buyback program. On top of the company's quarterly dividend payments, AT&T expects to spend as much as $20 billion over the next three years on share repurchases. Since the stock remains cheap relative to free cash flow, buybacks are a great use of capital that can potentially boost the stock price by driving up per-share earnings.

For investors looking for an inexpensive stock that could continue to rally in 2025 and beyond, look no further than AT&T.

A video game juggernaut

Let's get this out of the way: Shares of video game engine developer Unity don't look cheap relative to earnings, sales, or any other financial metric. The company is valued at about $9 billion, or roughly five times the average analyst estimate for revenue in 2024. Given that Unity is wildly unprofitable, that valuation looks pricey.

However, finding value in the stock market is more nuanced than looking at ratios and metrics. Unity has been going through a period of turmoil. The previous CEO blundered with an onerous fee that sparked backlash from developers and ultimately led to his ouster. A company reset followed, which featured a massive 25% layoff and other cost cuts. A new CEO took the reins last May, and he's already taken multiple positive steps to turn things around.

For starters, Unity fully scrapped the hated fees that wrecked its reputation. The company instead raised subscription pricing for its largest customers and is rolling out various AI-powered add-ons that can generate additional revenue. On the advertising side of the business, Unity is fully rebuilding its data and machine learning stack as it optimizes returns on investment for its advertising customers.

The value of Unity as a company comes from its dominance in the video game engine market. Along with Epic Games' Unreal Engine, Unity Engine has become one of the default choices for developers. A massive community around the engine creates a sort of network effect. Developers who don't choose a major game engine like Unity are taking a risk and probably setting themselves up for a longer development cycle.

Unity's turnaround is going to take time, so investors need to be patient. The process of rebuilding trust with developers won't happen overnight, and the advertising business remains a work in progress. But the company is making the right moves, and in the long run, it could be worth far more than $9 billion if it can successfully leverage its dominant position in the video game engine market to build a sustainable and profitable business.

Should you invest $1,000 in AT&T right now?

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Timothy Green has positions in AT&T. The Motley Fool has positions in and recommends Unity Software. The Motley Fool has a disclosure policy.