There are usually good reasons for companies to trade as penny stocks. After all, these are typically small companies with unproven business models. The market opportunity may also be limited.
On the other hand, penny stocks can sometimes offer substantial returns. We have certainly seen this with several Reddit stocks.
Now, it’s true that technical factors have been at work for many of these, such as short squeezes. But Reddit stocks also are about companies that have been overlooked – but may represent turnaround opportunities.
Then what are some of the interesting Reddit penny stocks?
Well, let’s take a look at seven:
- Cinedigm (NASDAQ:CIDM)
- Riot Blockchain (NASDAQ:RIOT)
- Atari (OTCMKTS:PONGF)
- Citius Pharmaceuticals (NASDAQ:CTXR)
- American Resources (NASDAQ:AREC)
- BlackBerry (NYSE:BB)
- Cronos Group (NASDAQ:CRON)
Penny Stocks: Cinedigm (CIDM)
Cinedigm has been a company in transition. It has been moving away from its legacy business of digitization to becoming a holder of streaming assets.
The strategy is still in the early stages – but it certainly has lots of promise. The focus is primarily on niche and indie content offerings. To this end, the company has struck a variety of deals for companies like Fandor, FoundationTV, Film Detective and Screambox.
Cinedigm has also been building its own ad-supported channels. Examples include The Bob Ross Channel, CONtv Anime and MyTime Movie Network. And they have been getting traction. During the most recent quarter, the revenues spiked by 150%.
Then there is a wild card: The company is exploring the emerging the NFT (non-fungible token) market. All in all, it should positioned nicely to benefit from this opportunity thanks to Cinedigm’s extensive video assets.
Riot Blockchain (RIOT)
Riot Blockchain is a miner of Bitcoin (CCC:BTC-USD). True, the revenue base is fairly small and the shares have already had a massive gain. During the past year, they have gone from 93 cents $55.46 as of this morning. The current market capitalization is $4.66 billion.
Despite this, RIOT stock could see more upside. The fact is that the crypto market seems to be at an inflection point. After all, traditional financial institutions like Visa (NYSE:V) and and Bank of New York Mellon (NYSE:BK) have been entering the market. Then there has been the investments from top traders like Paul Tudor Jones and Stanley Druckenmiller. And yes, the upcoming IPO of Coinbase will gin up lots of excitement!
In light of all this, there will likely be continued interest from investors to look at crypto plays in the equity markets – and RIOT stock will probably be one of the main choices.
After the glory days of the 1970s and 1980s, Atari suffered a prolonged dry spell. But during the past seven years, the company has been engaged in a major restructuring – and it looks like the company is getting its grove back.
Hey, the Atari brand is still powerful and has 80% consumer logo recognition. It even gets 500 million Internet searches per year.
In terms of the growth, it has been robust (although, it is based on a small base). For the past eight years, the CAGR (Compound Annual Growth Rate) has been an impressive 53%.
But this is not just about games. The company has been leveraging its brands for licensing revenue opportunities, such as for merchandising, clothing, online casinos, movies/TV, theme parks and even hotels.
Atari is also looking to make a move into the crypto market, with its own token. This will allow for blockchain gaming titles and NFT offerings.
Citius Pharmaceuticals (CTXR)
Citius Pharmaceuticals is a biotech company that is focused on developing anti-infectives. Even though the company is relatively small, it has been quite innovative and has three drug main candidates.
First of all, there is Mino-Lok. This is a treatment for blood infections, such as with catheters. Next, there is CITI-101, which is also referred to as Mino-Wrap. This is another treatment for infections – but focused on breast reconstructions due to mastectomies. And finally, there’s CITI-002. This is for those who suffer from hemorrhoids.
Among these, the CITI-101 is in Phase 3 trials and the prospects look promising. In fact, it has already received the QIDP (Qualified Infectious Disease Product) designation from the FDA (Food and Drug Administration).
CTXR stock has already had a nice rally – going from around 95 cents in November to $1.78 today. But the market capitalization is still reasonable, at $239.77 million. So if just one of these drugs gets approval, the stock price could go on another run.
American Resources (AREC)
American Resources is a supplier of raw materials, such as critical and rare earth minerals for the electrification market. For the past year, the company has suffered a plunge in revenues because of the impact of the novel corona virus. But with the rollout of the vaccines, things should get back on track soon.
Note that the company has been innovative in creating extraction systems that are environmentally friendly (they have over 15 patents). It has been involved in efforts for coal mining sites and decommissioned railcars as well as allowing for better recycling.
This ESG focus could provide a boost for growth, especially as the Biden Administration pushes more green policies.
But the rare earth business could be the main attraction. To this end, the company recently stuck an agreement with Hasler Ventures LLC to help separate and purify these rare earth elements.
Since BlackBerry lost its massive smartphone franchise a decade ago, the company has struggled. The strategy has transitioned towards being a security software company.
The Reddit crowd has glommed onto the shares lately. Consider that BB stock went from $3.70 to $28.77 during the past year. The price of BB stock is currently at $9.17.
I think there is potential with this one. The company has built a comprehensive platform for security, which handles most of the needs for enterprises. There have also been major investments in AI/ML to bolster the performance.
BB stock is also a play on the megatrend of the internet of things (Iot). The company’s QNX operating system has been installed in over 175 million cars. No doubt, this could be a leverage point for other revenue opportunities.
Cronos Group (CRON)
Cronos Group, which is a top cannabis producer, saw its stock go into overdrive after the election of President Joe Biden. CRON shares went from around $7 to a high of $15.82.
But lately, things have calmed down. Consider that CRON stock is now at $8.36.
Yet this does look like an opportunity.
In the latest quarter, the revenues more than doubled to $17 million. Some of the main drivers included the growth in the adult-use Canadian market as well as improvements in the U.S. and Israel.
Cronos does have a strong portfolio of brands. As a testament to this, Ulta Beauty (NASDAQ:ULTA) has agreed to sell the company’s Happy Dance offerings, which is a CBD product.
It’s also important to note that Cronos has a strong balance sheet, with $1.1 billion in the bank. In other words, the company has considerable resources to continue innovating its product line and to pursue acquisitions.
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On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article except for long positions in CIDM and CTXR.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.