The mania surrounding penny stocks — related to the “meme stocks” and Reddit stocks trend — is taking a breather right now. But does that mean this is an area to stay away from when it comes to opportunities? Yes and no.
On one hand, the trend that sent many stocks “to the moon” may be finally entering the history books. The most popular stocks on r/WallStreetBets, for instance, haven’t exactly been setting the world on fire like before. However, on the other hand, who’s to say that this is the only catalyst to send low-priced, speculative stocks higher?
Hype may have recently been behind the rollercoaster performances of many sub-$5 stocks. But for many of these names, there are other catalysts in play. And if these respective catalysts play out? They could deliver substantial returns for any investors who buy in today.
Of course, with big potential gains typically comes big risk. For individual investors, it’s best not to “bet the ranch” on any of these penny stocks. Still, if you’re looking to roll the dice on some long-shots, throwing $50 into each of these stocks may be a wager worth taking after all.
- Atossa Therapeutics (NASDAQ:ATOS)
- Cinedigm (NASDAQ:CIDM)
- 1847 Goedeker (NYSEAMERICAN:GOED)
- Globalstar (NYSEAMERICAN:GSAT)
- Mind Medicine (NASDAQ:MNMD)
- Naked Brand (NASDAQ:NAKD)
- Senseonics (NYSEAMERICAN:SENS)
- Sundial Growers (NASDAQ:SNDL)
- Uranium Energy (NYSEAMERICAN:UEC)
- XpresSpa (NASDAQ:XSPA)
Penny Stocks to Buy: Atossa Therapeutics (ATOS)
ATOS stock was a name that went along for the ride during the February and June “meme stock” frenzies. The first run for the biotech company’s shares — from around $1 per share to around $4 per share — was driven by several factors. In particular, though, the possibility that one of the many treatments in its pipeline would become commercialized was enticing to investors.
And the second run, which sent it from around $3 to as much as $9.80 per share? As I discussed late last month, much of this was fueled by both its status as a “short squeeze” play, as well as an overreaction to its inclusion in the Russell 2000 and Russell 3000 indices.
Of course, what drove this second wave was pretty much a one-time thing. However, there may still be merit in taking a small, speculative position in Atossa Therapeutics.
Pulling back further since I my last article on this pick of the penny stocks, it may be worth betting on ATOS for either of its recent Covid-19 focused candidates. Additionally, the cancer treatment that Atossa has been working on the longest, Exdoxifen, could be a winner as well.
CIDM stock is another long-shot play that investors in penny stocks may want to keep an eye on. Shares have been volatile this year, mainly bouncing between $1 and $2 per share. And of course, this could continue, as the hype that moved Cinedigm before leaves the scene and the stock starts moving on the prospects of its ad-supported and subscription-based streaming businesses.
Still, based on its latest financial results, this budding streaming operator may have a shot of competing with the bigger players that dominate the space. For the fourth quarter, streaming revenues were up 197% year-over-year (YOY). The main contributor to this growth was the company’s ad-supported streaming segment, which saw its revenue soar 331% YOY.
That said, it’s also important to note that Cinedigm is more than just a streaming company. CIDM is also an independent film distributor and owns a large library of film and television titles. These slower-growing segments could drag down the company’s overall revenue growth. In time, this could discourage investors from bidding the stock up any further. Today, CIDM has a rich valuation, with a forward price-to-sales (P/S) ratio of 5.54.
But if this name exceeds growth expectations for its streaming segment? Investors may have more reason to send the price up from the $1.67 it’s at right now.
Penny Stocks to Buy: 1847 Goedeker (GOED)
You may recall 1847 Goedeker’s shares experiencing a parabolic surge a few months ago, followed by an epic plummet. Back on May 28, InvestorPlace’s William White detailed how it all went down.
However, the play with GOED stock since then has had nothing to do with an encore. Instead, the rationale for going long on the stock is all about getting in ahead of the company, which has acquired a rival online appliance retailer, improving its operating performance.
Plus, the situation became even more interesting last month when Goedeker announced yet another major strategic acquisition. With GOED making an even bigger bet that it can turn itself into a more profitable (and in turn more valuable) enterprise, the amount of potential upside here could be even greater than previously anticipated.
Keep in mind that, at today’s prices of just over $3 per share, investors have already partially priced-in the payoff of this roll-up strategy. The cyclical nature of the appliance industry could also come into play, if we see a slowdown in America’s “too hot to touch” housing market. But if you’re looking for a low-priced stock that could possibly provide triple-digit percentage returns? Taking on the risk and buying this pick of the penny stocks could be worthwhile.
As a stock with both a hidden asset (its C-band spectrum) and exposure to the space megatrend, there’s a lot to like about GSAT stock. Earlier this year, investors thought so, too. They bid up the satellite operator from around 34 cents at the start of January to as much as $2.98 at the height of the first “meme stock” wave.
After that, though, shares pulled back. Today, they trade around the $1.50 mark. That’s even as the recent space launches by Jeff Bezos (via Blue Origin) and Richard Branson (via Virgin Galactic (NYSE:SPCE)) have put space stocks back on investor radars.
So, why give Globalstar a shot? Well, the stock could soon climb out of this slump and get back on the path to $3 or even $4 per share. How so? As Louis Navellier noted on Jul. 26, outsized growth may be in the cards due to rising demand for satellite services as well as the growth of the Internet of Things (IoT).
If GSAT’s profitability sees big growth moving forward, its valuation could go up as well. Of course, as Navellier put it, this may take time. But with the risk-return proposition in your favor, speculating on this one of the penny stocks could be a wise move.
Penny Stocks to Buy: Mind Medicine (MNMD)
Next up on this list of penny stocks is Mind Medicine. First off, there’s no denying MNMD stock belongs in the “moonshot” category of investment opportunities. In case you don’t know, this early stage company focuses on turning psychedelics (such as LSD) into treatments for conditions like anxiety disorders.
A few months ago, I discussed how much of a massive opportunity this company may be pursuing. True, it faces a steep road to success. But if the stars all align, this may be a multi-billion dollar pharmaceutical business in the making — many times over the $1 billion market capitalization it currently has at around $3 per share.
Still, let me put emphasis on that if in “if the stars all align.” The past year has seen a lot of enthusiasm about psychedelic medicine eventually becoming a $100 billion industry. However, a lot of things have to change before there’s a chance of that happening. As InvestorPlace contributor Muslim Farooque recently brought up in his bearish article on the company, psychedelics first need to become both legal and socially acceptable.
What’s more, this company is likely many years away from proving its alternatives are as or more effective than typical pharmaceuticals. Put simply, this whole thing could blow up and the stock could plummet back well below $1. Still, if you’re looking for a lottery ticket in the health space, this may be the one.
Naked Brand (NAKD)
Reddit traders may have dived back into shares of this intimate apparel purveyor back in June, but their attempt to recreate February’s parabolic run failed to play out. Now, the stock’s chances of getting hyped up again are slim. So, why buy NAKD stock? Well, there may be a way that company-specific catalysts help it recover, even as meme-fueled investing trends fade.
At 53 cents today, investors are pricing in less of Naked’s potential to pull off a digital metamorphosis. Earlier this year, the company sold off its unprofitable brick-and-mortar operations and doubled down on turning its e-commerce business into a formidable digital-first competitor to Victoria’s Secret (NYSE:VSCO).
No doubt, it will be a challenge to take on VSCO as well as general retailers like Amazon (NASDAQ:AMZN) who also sell intimate wear. So, things could go one of two ways for NAKD stock.
On one hand, the company’s digital transformation could pay off, making the underlying business profitable and worth many times the current valuation. On the other hand, though — despite a $270 million war chest — this pick of the penny stocks could fail to scale up operations. If that were to happen, NAKD would land with a much lower price.
Of course, 53 cents per share may not be the most opportune entry point for NAKD stock. However, given the fact that this one will likely go to zero or zoom back to its 52-week high, you could consider adding it to a small portfolio of very speculative plays.
Penny Stocks to Buy: Senseonics (SENS)
Next on this list of penny stocks is Senseonics, another name whose Reddit wave has come and gone. To me, today’s valuation of $1.26 billion still overestimates how much success the company will find with its continuous glucose monitoring (CGM) diabetes product, Eversense. So, why should you buy SENS stock as it holds steady around $3 per share?
Previously, I was skeptical that this one’s short-squeeze catalyst would play out. Now, though — as its short interest remains high at 21.6% of outstanding float — I’ll concede that Senseonics may have a greater shot of getting squeezed than the other low-priced, heavily shorted stocks buzzed about on r/WallStreetBets.
Why? Well, the potential for just a small bit of positive news may send SENS soaring higher once more. Granted, this pick may not have the ability to rise as high as other bargains. The opportunity to “get in early” came and went at the start of 2021, when it traded for around $1 per share.
Yet, unlike with most of the Reddit penny stocks, Senseonics’ catalyst has a greater chance of actually playing out. The risk-return proposition today isn’t as optimal as it would be at $1 or $2 per share. But if you’re looking to throw a small amount of your portfolio into an all-or-nothing position? SENS stock may be worth it.
Sundial Growers (SNDL)
SNDL stock has been one of the most popular penny stocks out there. So, what’s the latest on Sundial Growers? This Canada-based pot producer’s U.S. legalization catalyst may still be a work-in-progress. Not even the “blue wave” election results were enough to fast-track changes to federal marijuana policy.
Yet, as Sundial remains the “legalization lottery ticket,” the payoff could be massive when this catalyst finally plays out. True, Congress probably won’t pass any reforms in 2021. But given where the political winds are blowing, federal legalization still looks like an inevitability within the next few years.
Moreover, while legalization is the primary catalyst here, it also isn’t the only thing that could send SNDL stock skyrocketing again. If this company can successfully invest its cash raised via its dilutive share offerings, it may be able to lift itself out of the sub-$1 price level.
Still overvalued, Sundial’s not a stock you buy based on fundamental analysis. However, with two paths to a rebound, including SNDL in your $500 penny stock portfolio isn’t the worst investing decision you could make.
Penny Stocks to Buy: Uranium Energy (UEC)
Uranium stocks aren’t as hot as they were just a few months back, but don’t take that to mean you need to stay away from Uranium Energy. After all, the supply-demand dynamic continues to be in favor of uranium miners.
Of course, near-term tailwinds for uranium prices may not matter so much for this junior miner anyway. Right now, the company does not generate any revenue. In other words, buying in today is a bet that, down the road, a continued rise in uranium prices will allows UEC to become a profitable operating business.
Yes — as is par for the course with low-priced speculative plays like this one — that success is far from guaranteed. But if the global push to “go green” results in more renewed interest in nuclear power, uranium stocks may reach prices not seen since since the late 2000s.
Plus, thanks to operating leverage, even a moderate long-term boost in uranium could be a game-changer for UEC stock. Risk runs high here, no doubt — that’s what makes it an “invest only if you can afford to lose” situation. Still, this name is also a perfect opportunity to throw into your portfolio of penny stocks.
Last up on this list of penny stocks is XpresSpa. This company temporarily benefited from the hype back in February. But, as you may know, shares in the airport-spa-turned-Covid-testing-center operator saw their biggest boost in the summer of 2020. That was when XSPA stock was one of the most popular picks among retail speculators on the Robinhood (NASDAQ:HOOD) trading app.
It never made much sense why this company — hit hard by the virus — saw it stock soar after the outbreak. Yet, as it has given up most of its Covid-19 related gains, taking a chance on XSPA at $1.66 per share may actually pay off.
Why? For one, the company has started to reopen its airport spa locations. This could mean much better results for the third and fourth fiscal quarters of 2021. On top of this, though, XpresSpa continues to make progress with its sideline testing operation. True, the Delta variant may currently be calling the reopening back into question. But what if a scenario plays out where air travel continues to get “back to normal” all while Covid-19 testing remains in-demand?
If that were to happen, this company could see much stronger operating results than it did before the pandemic. Sure, with its historic lack of profitability (even during good times), this may be a stretch. However, the potential gains from this long-shot thesis may vastly exceed the risk of it tumbling down well below $1 per share.
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On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Thomas Niel 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.