Putting it simply, penny stocks haven’t been so hot lately. Chalk this up to both the deflating of the meme stock bubble, as well as overall market volatility. Not only have popular names in this category (stocks priced at $5 or less) moved lower. Many once-hot names have tanked to the point where they too have “penny stock status.”
For a lot of these former favorites among investors, a comeback is going to be a challenge. Upcoming monetary tightening, plus the high chances of interest rate increases in 2022, has dampened their appeal. Why? Growth stocks, valued on future results, see their present values go down when interest rates go up.
Having said that, this doesn’t necessarily mean all low-priced stocks are doomed to struggle from here. Several of them have catalysts in play. These catalysts could outweigh the negative effects of the overarching issues. In fact, not only could these catalysts outweigh any multiple compression. They may enable these names to break out of penny stock territory, to prices well above $5 per share.
So, which penny stocks should you buy, with the potential to break through the ceiling, en route to higher prices? Consider these seven top names that could do just that:
- Cinedigm (NASDAQ:CIDM)
- Vaalco Energy (NYSE:EGY)
- Globalstar (NYSEAMERICAN:GSAT)
- Mind Medicine (NASDAQ:MNMD)
- Romeo Power (NYSE:RMO)
- Senseonics (NYSEAMERICAN:SENS)
- Uranium Energy (NYSEAMERICAN:UEC)
Penny Stocks: Cinedigm (CIDM)
Scores of penny stocks that became popular among Reddit traders earlier this year have struggled in recent months. But not CIDM stock. Shares in this media and streaming play, which popped during the meme stock waves, have managed to move higher.
Up 256.7% year-to-date, did you miss the boat with Cinedigm? Not exactly. Yes, it may not have another 256.7% run in it. At least in the near term. Yet given how well it’s been able to continue scaling up its streaming operations? I wouldn’t rule out another big move higher.
The streaming business may be dominated by the big media and tech conglomerates. This makes it tough for an independent name like Cinedigm to grab market share. But based upon its success acquiring content libraries, and rolling out a wide plethora of ad-supported and subscriber-based streaming channels? As the company has recently touted, both its subscriber numbers and streaming ad revenues have seen triple-digit percentage growth in the past year.
Projected to generate $49.3 million in revenue this fiscal year (ending March 2022), it has plenty more room to scale up. As it keeps on doing so, delivering impressive quarterly growth numbers? CIDM stock may have room to soar in price. From around $2.40 per share today, to prices above $5 per share.
Vaalco Energy (EGY)
With energy prices not only bouncing back from their pandemic declines, but getting back to multi-year highs, many oil and gas penny stocks have gone on incredible runs in 2021. Yet while the easy money may have been already made, there are few opportunities for investors a little late to the party.
For example, EGY stock. Shares in this small exploration and production (E&P) company, with offshore production assets in West Africa, are up 83% year-to-date, and more than 214% over the past 12 months.
Its gains over the past year may make it seem like it seems doubtful it has room to move higher. But if oil and gas prices remain high, which seems likely in this inflationary environment? It stands a strong chance of delivering $1.36 per share in earnings next year, which projections call for it to in 2022. Along with this, recent news of it replacing the production, storage, and offloading unit at its Etame site in Gabon, points to lower costs and higher earnings going forward.
With the stock recently trading for around $3.25 per share, even as volatile, cyclical names like this one command lower valuations, delivering results in-line with expectations may be enough to send it above $5 per share.
Penny Stocks: Globalstar (GSAT)
Since August, shares in satellite company Globalstar have traded wildly. Why? Rumors that a partnership with Apple (NASDAQ:APPL) is in the works. News of this is what enabled it to zoom from around $1.25 per share to prices above $2.50 per share, in late August and early September.
However, shortly after that, these hopes were initially dashed, after Apple did not mention whether its upcoming iPhone 13 would have satellite capabilities. Much less, with services provided by this company. On this, GSAT sank back to around $1.50 per share.
But now? As my InvestorPlace colleague Chris MacDonald wrote recently, the Apple/Globalstar rumors are back. Hope and hype are back on the table. The tech giant may still sign on as a customer of this small satellite services provider. Nevertheless, even if the deal really isn’t in the works, don’t take that to mean it’s best to skip out on Globalstar.
In a recent article, our Louis Navellier discussed several promising catalysts that remain in orbit with this stock. Namely, the possibility of it obtaining a big commercial IoT (internet of things) contract with an alternative energy company. Along with this, the company could make progress unlocking the value of the “hidden assets” on its balance sheet. These include its C-band spectrum, plus a massive tax-loss carryforward. Expect further wild price action, but consider this another one of the penny stocks that could break free from this status.
Mind Medicine (MNMD)
Back on April 27, it briefly made it to prices above penny stock levels. But since then, Mind Medicine (Mind Med for short) shares have fallen back to low-single digit prices. It may continue to be disappointing for investors in this company, which is trying to turn psychedelics such as LSD into FDA-approved treatments.
However, while it may not set the world on fire in the next month, or even the next year, MNMD stock still has the potential to become worth materially more than what it trades for today in the long run. Assuming of course, the research it’s performing today leads the way for it to create therapies/treatments it can commercialize.
As I wrote back in September, MindMed’s main initiative right now is Project Lucy. This research project is studying whether LSD can help treat anxiety. A possible end result of this research could be a pharmaceutical product that could generate billions in annual revenue (based on comparable anxiety treatments like Prozac).
Better yet, other candidates in its pipeline could become blockbuster drugs down the road. It may look pricey to some, considering it’s a pre-revenue company, with a $866.1 million market capitalization. But with the potential for Mind Medicine to be worth many times that years from now? It could be well worth it to take a risk, and buy some at $2.35 per share.
Penny Stocks: Romeo Power (RMO)
Unlike the four stocks discussed above, RMO stock hasn’t been a penny stock for that long. The electric vehicle (EV) battery play, which went public via a SPAC (special purpose acquisition company) merger late last year, started off trading above $20 per share.
At the time, excitement for incoming President Joe Biden’s clean energy agenda was helping to sustain the off-the-charts bullishness for EV and related plays seen in 2020. But a combination of dialed-back expectations for how quickly vehicle electrification would happen, coupled with underwhelming quarterly results, has sunk it to around $4.77 per share, officially making it a penny stock.
As it stands now, it’s unclear whether Romeo Power, which is competing with names like Microvast (NASDAQ:MVST) in the emerging commercial EV battery market, will live up to the high expectations set while its SPAC deal was still pending. However, with its moderate short-interest (26% of outstanding float), and so much negativity baked-in, any sort of positive news may be enough to send it bouncing back in a big way.
One example? Something like the passing of Congress’s infrastructure bill could pop it back out of penny stock territory. For investors bullish on the electrification trend, this may be a “green wave” play to consider.
A penny stock that’s held onto most of its gains from the meme stock waves, what’s next for Senseonics? The medical technology company, which is rolling out its flagship product, Eversense (a continuous glucose monitoring, or CGM, system), remains priced entirely on its future potential.
Back in August, I saw this as a warning sign that SENS stock was overvalued, and that the short-side (which has, and still is, betting heavily against it) is correct in its bearishness. Yet looking at it today? It may have a greater chance of popping on further positive news, than dropping to a price that leads the shorts to cover their positions at a tidy profit.
How so? There’s one development that could be enough to send it out of the penny stock category, on its way to high single-digit prices. That would be FDA approval of enhanced versions of its Eversense CGM product. As my InvestorPlace colleague Chris Markoch wrote in September, the FDA has approved the 90-day version. That is, the version of this device that must be replaced every 90 days. What it has not yet approved are the 180-day version of the product, or a version of the product that can be implanted, and operate for a year without replacement.
The possibility of more volatility among richly-priced growth stocks is a risk to consider. But countered with the potential of a surge on FDA news? SENS stock may be worth buying at today’s prices (around $3.30 per share).
Penny Stocks: Uranium Energy (UEC)
Is there a uranium bubble? Or are investors correct to be bullish that this controversial, yet clean, energy source is set to come back in vogue? That’s the wager you’re making when buying UEC stock.
Uranium stocks and ETFs (exchange-traded funds) have been running hot. At first, some chalked up the run-up to factors like the hoarding of uranium by financial buyers, like the Sprott Physical Uranium Trust (OTCMKTS:SRUUF). But there have been some headlines that indicate that increased usage of nuclear power (i.e. increased demand for uranium) is set to happen in the years ahead.
Governments like France and Japan are looking at using modular nuclear reactors to replace existing nuclear infrastructure, and to bring more carbon free electricity production online. Other governments, weighing safety concerns against environmental concerns, may decide nuclear energy is the best realistic substitute for fossil fuels.
At around $3.50 per share today, it may not take much to send Uranium Energy above $5 per share. That’s a price level it hasn’t seen in more than a decade. With the stock trading entirely based on uranium price trends, a reversal could mean big declines. This company, right now generating zero revenue, has little to fall back on. Yet if you’re confident that uranium’s set to get back to pre-Fukushima disaster prices, you may want to buy this penny stock.
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, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.