It’s still a tough environment for investors long Reddit penny stocks. And, it could get a whole lot tougher. With fears of a correction mounting, popular names hyped up online on platforms like r/WallStreetBets may be in for another move lower.
In hindsight, many of the Reddit stocks that “went to the moon” earlier this year had little business doing so. Overvalued, with underwhelming fundamentals, there wasn’t much to sustain their then-inflated prices.
That being said, some stand out as names that could withstand a possible market maelstrom. Some of these are commodities plays that could gain from potentially high rates of inflation. Others names may benefit from trends so game-changing, they help the stock move up – even if markets overall trend down.
Now, there’s no guarantee these eight Reddit penny stocks will be bulletproof if markets meltdown in the near term. But, standing a good chance of holding onto their recent gains, and possibly gaining further, keep them on your watch list:
- Allied Esports Entertainment (NASDAQ:AESE)
- American Resources (NASDAQ:AREC)
- Centennial Resource Development (NASDAQ:CDEV)
- Cinedigm (NASDAQ:CIDM)
- Sundial Growers (NASDAQ:SNDL)
- Support.com (NASDAQ:SPRT)
- Uranium Energy Corp (NYSEAMERICAN:UEC)
- 22nd Century Group (NYSEAMERICAN:XXII)
Reddit Penny Stocks: Allied Esports Entertainment (AESE)
Allied Esports, an operator of esports event venues, has pulled back from its highs set back in early March. But, even if markets overall turn negative, shares may be able to hold steady near today’s prices (around $2.40 per share).
Why? First, AESE stock remains a takeover target. Sure, the company rebuffed an initial low-ball buyout offer from gaming operator Bally’s Corporation (NYSE:BALY). And, while I recently made the case why other casino gaming companies may be interested in making it a bolt-on acquisition, so far, this hasn’t happened.
But, even if a deal doesn’t happen, Allied Esports may have another ace in the hole. Once it completes its sale of its legacy World Poker Tour unit for $105 million, the company, with only a market capitalization of $88.3 million, will have another nice chunk of change in its coffers. This cash could be used to bulk up its operations either through the organic development of new arenas or an acquisition.
This stock, which before its Reddit-fueled hype traded for less than $1 per share, may look like it’s going to give up the rest of its 2021 gains. Yet, with plenty of potential catalysts still at play, it could be able to get through any upcoming market volatility relatively unscathed.
American Resources (AREC)
AREC stock is another past favorite of the Reddit set that’s down big from its highs set in February. At one point trading for as much as $8.02 per share, the metallurgical carbon and rare earth metals play changes hands for around $2.90 per share.
But, there may be good reason why it’s found its floor at these price levels. Yes, just looking at recent quarterly results, you may do a double take. In the last quarter, American Resources generated just $10,646 in sales. But, there’s a good explanation for these five-digit sales figures. Due to the novel coronavirus pandemic, the company idled its operations in January 2020, and didn’t resume them until March 29.
In the coming years, sales are expected to come back in a big way, climbing from $546,003 in 2020 to an estimated $61.2 million this year. Much of this “return to normal” may be reflected in the company’s current valuation. But, thanks to surging demand for rare earth metals, coupled with secular growth tailwinds for metallurgical carbon, the coming years could mean continued strong results in a post-pandemic environment.
As a basic materials play, the stock may get a boost as well from the recent inflation fears. Things may have gotten a bit overheated at the height of meme stock madness. But, AREC stock could hold steady or rise if markets go into turmoil.
Reddit Penny Stocks: Centennial Resource Development (CDEV)
Centennial Resource Development is another of the Reddit penny stocks that could benefit greatly from an inflationary environment. Some may say that the specter of inflation is already priced into commodities stocks like oil and gas exploration plays.
CDEV stock has certainly been boosted from oil’s stunning comeback over the past year. But, shares may still have room to run if the price of crude oil continues to climb. As InvestorPlace’s Muslim Farooque discussed May 14, this E&P (exploration and production) play is focused on natural gas. Natural gas prices have more than doubled from last year’s lows. But, it’s not been as dramatic of a surge as seen from crude oil prices.
However, it’s not as if this stock is dependent on natural gas prices for it to make more big moves. With most of its upcoming production slated to be of oil, rising prices could give a boost to its bottom line. With results set to see major improvement this year and the next, things may be far from topping out at recent prices around $4.55 per share.
Yes, investors have many ways to play a possible return to boom times for the oil and gas industry. But, this penny stock, still on the radar of Reddit traders, may be one to keep an eye on.
Cinedigm (CIDM)
Its non-fungible token (NFT) catalyst may no longer be as strong as it was a few months back. But, Cinedigm could more than make up for it. How? By stopping to chase trends, and get the focus back to its main business, ad-supported content streaming.
Sure, it’s not as exciting as NFTs. And, compared to its big media/big tech rivals, it’s at best a small fry operator. But, CIDM stock may have found a floor at today’s prices (around $1.20 per share). Shares may not be cheap at today’s valuation. Even with the growth in streaming, the company’s sales are only expected to rise from $30.7 million to $45 million over the next fiscal year.
Buying this is a long-term bet it grows into a major name in streaming. In turn, that may mean you have to enter a position at a premium valuation. But, it may be worth it to pay up. With moves such as the recent retirement of a large chunk of its outstanding debt, its balance sheet is getting stronger. And, while it’s not yet profitable, as it scales up, we should start seeing big improvements to its operating margins.
Shares might see some volatility if markets experience a correction. But, compared to some of the other past meme stock favorites, CIDM stock could hold on at today’s price levels.
Reddit Penny Stocks: Sundial Growers (SNDL)
If you’ve read my past write-ups on Sundial stock, you’ll know I’m skeptical that this hyped up stock can avoid collapsing further, once the mania surrounding it finally dissipates.
Yet, after falling back below $1 per share, I may be changing my tune. Now, I’m not exactly bullish. But, at around 70 cents per share, it may have reached a price level where rebound potential outweighs additional downside risk. Why? Chalk it up to the still-in-play legalization catalyst.
Wall Street has written off it happening. But, there’s still potential in the immediate future for game-changing reforms to America’s federal marijuana laws. When the Democrats retook both the White House and control of the U.S. Congress, many believed this would mean a fast-tracking of legalization. Yet, so far, intra-party gridlock has resulted in a lack of progress.
But, once largely a issue supported by the Democrats, some Republicans are pushing for legalization as well now. With support for legalization now turning into a bipartisan issue, the odds of change may be greater than the market is currently pricing into pot stocks, including this one. Sure, this remains largely a lottery ticket on legalization. Yet, any movement on the U.S. legalization issue will be enough to send this Canada-based pot play back into hyperdrive once again. Even if the stock market in general is heading lower.
Support.com (SPRT)
Shares in Support.com experienced an epic spike back in March, when the company announced its plans to merge with privately-held Bitcoin (CCC:BTC-USD) miner Greenidge Generation Holdings.
But, since then, SPRT stock has taken a big tumble. Some may see the party being over for crypto mining plays. Especially as BTC prices have tumbled back below the $50,000 level, and may be at risk of pulling back further.
Even so, there may be a case to be made that, after its spring rally has all but reversed, Support.com shares aren’t at risk of falling back further. News of falling Bitcoin prices, of course, doesn’t bode well for this company’s results post-merger. But, Greenidge may be one of the better-positioned crypto mining companies.
Not only that, with this reverse merger priced in a way that’s favorable to existing holders of SPRT stock, it’s not as if this company’s soon-to-be majority owners are locking-in big gains at their expense. Yes, this stock may struggle if BTC continues to fall. But, if it rebounds while the stock market heads lower, this stock may be able to hold steady, or even gain, from today’s prices.
Reddit Penny Stocks: Uranium Energy Corp. (UEC)
Uranium plays like UEC stock are some of the Reddit penny stocks that have held relatively steady since the investing trend’s peak back in February. This is due to the fact that President Biden’s ambitious clean energy plans may be a boost for the industry.
But, will that be enough to send the stock, currently trading for around $3.27 per share, up toward its highs ($3.91 per share), and beyond? Some, like one Seeking Alpha commentator, are bearish, believing there’s a disconnect between rising uranium prices, and the fundamentals of popular uranium stocks.
Sure, with its $677.7 million market capitalization, compared to its lack of operating revenue, clearly a lot of hope remains priced into UEC stock. Yet, after nearly a decade of depressed prices (fueled by the 2011 Fukushima nuclear power plant disaster), the uranium rebound may be in its early stages. As prices rise, so does the potential value of this junior miner’s uranium mining projects.
The worldwide push for cleaner energy continues. Nuclear power, despite its controversy, may be a clean energy source that can fully replace fossil fuels. If support for nuclear power renews, we may see uranium prices rise back toward multi-decade highs, which bodes well for this high-risk, high-potential return basic materials play.
22nd Century Group (XXII)
XXII stock is another penny stock that could stay strong, even if markets overall turn weak. Why? It’s something that’s already factored into its share price. I’m talking about a possible move from the U.S. government to force tobacco companies to reduce nicotine levels in cigarettes.
How does this benefit 22nd Century Group? Federal regulators may only now be seeing this as a means to toss cigarettes into the ashtray of history. But, this development stage company has pursued this for years. They already have the technology to facilitate this, if nicotine reduction in cigarettes becomes mandated.
Now, the tobacco companies are fighting hard to prevent this from becoming required. Yet, with the Food and Drug Administration (FDA) now taking more aggressive actions against big tobacco, including their planned ban on menthol cigarettes, the recent headlines may be more than just talk.
XXII stock could see a big decline if this aforementioned development ends up not happening. But, it would be a tremendous game-changer if it does happen, even if the overall stock market experiences a correction, crash, or selloff.
On the date of publication, Thomas Niel held a long position in Bitcoin. He did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
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