In the last few quarters, Reddit penny stocks have been game-changers for many portfolios. Penny stocks surging five or ten-fold in a few months seems like the new normal. Of course, it makes sense to stick to value investing at a time when market valuations seem stretched. At the same time, it would be painful to miss out on multi-fold return opportunities.
I believe that 10% to 20% of portfolio allocation can be made towards Reddit penny stocks. This column will discuss seven penny stocks that are worth considering. These stocks are not purely speculative. Positive business development can translate into big upside for these names.
Let’s take a deeper look into the possible catalysts for these Reddit penny stocks.
- Citius Pharmaceuticals (NASDAQ:CTXR)
- Transocean (NYSE:RIG)
- American Battery Metals (OTCMKTS:ABML)
- Nokia Corporation (NYSE:NOK)
- Timber Pharmaceuticals (NYSEAMERICAN:TMBR)
- HIVE Blockchain Technologies (OTCMKTS:HVBTF)
- Sundial Growers (NASDAQ:SNDL)
7 Reddit Penny Stocks to Watch: Citius Pharmaceuticals (CTXR)
CTXR stock has been on the Reddit army radar for awhile. The stock has surged by 60% in the past month. However, there seems to be more upside potential.
As an overview, Citus Pharmaceuticals is a clinical stage pharmaceutical company. The company has a product pipeline of candidates for CVC infections and therapy for hemorrhoids. Further, the company also has pre-clinical pipeline for prevention of infections related to breast therapy and to treat ARDS.
It’s worth noting that the company’s candidate for CVC infections is currently in Phase 3 of clinical trials. Positive results from late-stage trials can trigger a significant rally. Further, the company’s candidate for therapy for hemorrhoids, is expected to enter Phase 2b trials in the third quarter.
As of March 2021, the company reported a healthy cash buffer of $103 million. Therefore, there are ample funds for the clinical trials.
Recently, the company added John Laffey, a leading scholar in acute respiratory distress syndrome, to their scientific advisory board. Citius Pharmaceuticals seems to be making the right moves and the outlook for this Reddit penny stock is bright.
Transocean (RIG)
With Brent oil trading above $70 per barrel, oil and gas stocks have been popular. RIG stock, which is currently sitting at a short float of 14%, seems primed for a short squeeze. It’s among the top Reddit penny stocks to consider.
Transocean is a provider of offshore drilling rigs and the company seems to have navigated the worst for the industry. As oil trends higher, the order intake is likely to improve. At the same time, day-rates can potentially trend higher and that would imply robust EBITDA margin and cash flows.
Currently, Transocean has an order backlog of $7.4 billion, which provides near-term cash flow visibility. A majority of the company’s order backlog is with investment grade oil and gas companies.
Further, with a liquidity buffer of $2.5 billion, the company is better positioned from a financial perspective. It’s important to note that the company has a fleet of modern rigs, and as day-rates trend higher, de-leveraging is likely.
Transocean has also filed for a potential equity issue worth $400 million. However, the stock has remained resilient even with the prospects of equity dilution. The funds from the issue will help Transocean in financing new builds.
Overall, RIG stock looks attractive, and if oil continues to trend higher, the stock can deliver multi-fold returns.
7 Reddit Penny Stocks to Watch: American Battery Metals (ABML)
ABML stock has surged by over 1,500% in the last 12-months. At $2.14, the stock is still attractive among Reddit penny stocks.
As an overview, the company is in the business of exploration, mining, extraction and recycling of battery metals. With the surge in adoption of electric vehicles, the company’s stock has been in focus.
It’s worth noting that the company is in the process of changing its name to American Battery Technology. Further, the company has submitted an application for listing on the NASDAQ. Clearly, there are big changes on the horizon and the stock is likely to remain in focus.
In terms of positive business developments, the company recently received unanimous approval from the Fernley City Council for the construction of a lithium-ion battery recycling plant. The plant is likely to have a capacity of 20,000 metric tons of lithium-ion batteries per annum. Earlier this month, American Battery also announced the acquisition of water rights for the plant.
On the flip-side, there is a possibility of equity dilution as the company initiates construction of the recycling plant. However, any dip will be a good opportunity to accumulate.
Nokia Corporation (NOK)
NOK stock is among the most promising Reddit penny stocks. If the company’s business segments continue to perform well, stock returns can be multi-fold.
For Q1 2021, Nokia reported revenue growth of 9% on a year-on-year basis to 5.1 billion euros. Network infrastructure and mobile networks contributed to growth acceleration. Further, the company reported operating profit, compared to an operating level loss for Q1 2020.
It’s worth noting that the company expects an operating margin of 8.5% for 2021. Operating margin is likely to expand to 11.5% in 2023. Therefore, free cash flow is likely to accelerate in the coming years and that’s a key stock upside trigger.
Nokia believes that the total addressable market for the company’s service is worth 110 billion euros. This includes mobile network, network infrastructure and cloud network services. The key point here is that there is significant scope for market penetration and revenue upside.
Overall, as adoption of 5G increases globally, Nokia seems to be well positioned for steady growth. The company already has 160 commercial 5G deals and 63 live 5G network deployments. Additionally, the company reported 63 new enterprise customers for Q1 2021. With a total cash buffer of 8.8 billion euros, Nokia seems to be well positioned to invest in innovation driven growth.
7 Reddit Penny Stocks to Watch: Timber Pharmaceuticals (TMBR)
After surging to an all-time high of $3.65 in February 2021, TMBR stock has declined to current levels of $125. This seems like an attractive entry point with the company likely to have a promising future.
Timber is a rare and orphan disease drug pharmaceutical company with focus on dermatologic diseases. According to the company, 30 million people in the U.S. are living with a rare disease. Further, the global premium products market size for orphan and rare dermatology therapeutics is expected to be worth $6.07 billion by 2024. This presents a big market opportunity for Timber Pharmaceuticals.
Currently, the company has five candidates in the rare dermatologic disease pipeline. Importantly, two drug candidates are in Phase 2b of trials with another entering into Phase 3. Furthermore, the company has orphan exclusivity for three strategic candidates in the U.S. and Europe. Therefore, if the company can commercialize the candidates in the coming years, there is big growth potential.
From a financial perspective, the company had $10.4 million in cash as of December 2020. This is sufficient to meet the capital expenditure requirement through Q3 2021. It’s very likely that the company will pursue equity dilution to raise funds. However, given the product pipeline, the outlook is bullish and the stock can deliver robust returns from current levels.
HIVE Blockchain Technologies (HVBTF)
Bitcoin (CCC:BTC-USD) may have crashed below $30,000 in recent days. However, the cryptocurrency market is still at an early stage. There are interesting areas developing in the cryptocurrency world, which is likely to ensure continued investor interest.
HVBTF stock is among the attractive Reddit penny stocks to consider. Recently, the company got approval for an up-listing on the NASDAQ exchange. This is a potential trigger for the stock surging higher once there is a renewed rally in cryptocurrencies.
Hive Blockchain is primarily involved in Ethereum (CCC:ETH-USD) mining. For Q3 2021, the company mined 21,506 Ethereum. For the same period, the company’s total income was $13.7 million with a gross profit of $10.6 million.
At the same time, the company purchased a Bitcoin mining facility in Quebec in Q1 2021. This helped the company increase the number of Bitcoins mined to 165 in Q3 2021.
In April 2021, the company also announced the acquisition of DeFi Technologies. The latter is focused on the decentralized finance segment, which is another promising area of growth. Billionaire Mark Cuban believes that decentralized finance could pose a serious competition to traditional banks.
7 Reddit Penny Stocks to Watch: Sundial Growers (SNDL)
SNDL stock has witnessed significant volatility in 2021. The stock was trading at 47 cents at the beginning of the year and surged to a high of $3.96 by February 2021. Sundial used the stock momentum to raise funds for growth. With significant equity dilution, the stock has trended lower, breaking around a dollar at time of writing. I believe that these are attractive levels to accumulate.
It’s worth noting that Sundial currently has $873 million in unrestricted cash. This will allow the company to pursue organic and acquisition driven growth. Sundial has a product portfolio with a focus on inhalables. The company has increased marketing efforts on the branded product portfolio. This is likely to have a positive impact on the top-line and EBITDA margin.
Sundial has also formed a joint venture (JV) with SAF Group (NYSE:SAF). The JV will invest in debt, equity and hybrid instruments globally in the cannabis sector. In May 2021, Sundial also announced the acquisition of Inner Spirit Holdings (OTCMKTS:INSHF) and Spiritleaf retail cannabis network. For Q4 2020, Inner Spirit reported revenue of $9.2 million.
Given the cash buffer, more acquisitions are likely in the coming quarters. As top-line and EBITDA accelerates, SNDL stock can potentially surge higher.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
