Sure, the bubble that emerged in penny stocks last year has long since passed. Most low-priced stocks ($5 per share or less) that went “to the moon” during 2021’s many “meme stock waves” now trade at much lower prices.
But while the overall “bubble” has obviously seen a serious deflating, there are several names that have managed to hold onto a large bulk of their gains. In addition, there are a few former penny stock winners, while down big from their highs, still sport prices well above pre-bubble levels.
To some, these penny plays may appear like they’ll carry on with their resiliency. In the case of former high-fliers that have taken a dive lately, it could look like a comeback is in store. However, make no mistake. Although they haven’t given back all their bubbly gains, count on it happening sooner or later. Richly priced compared to their fundamentals, a drop to a price more in line with underlying value will eventually happen. Especially as rising interest rates dampen the appeal of more speculative plays.
With these seven penny stocks, be careful. Whether they are still have flying high, or have already started to deflate, more heavy losses may lie ahead:
- AeroCentury (NYSEAMERICAN:ACY)
- Vinco Ventures (NASDAQ:BBIG)
- Gevo (NASDAQ:GEVO)
- Insignia Systems (NASDAQ:ISIG)
- MicroVision (NASDAQ:MVIS)
- Ocugen (NASDAQ:OCGN)
- Phunware (NASDAQ:PHUN)
Penny Stocks: AeroCentury (ACY)
Up until recently, AeroCentury was a small lessor of commercial aircraft. It goes without saying that was a bad place to be when the coronavirus pandemic first hit in 2020. In fact, due to the pandemic and tailwinds it’s created for the aviation industry, the company filed for Chapter 11 bankruptcy last March.
However, a Chapter 11 filing didn’t cause a “game over” moment for ACY stock. In fact, it rocketed higher. When it filed for Chapter 11, the stock traded for under $1 per share. By the time it completed its reorganization, shares had zoomed to prices north of $10.
With its move into the metaverse, through its metaverse gaming segment Mega Metaverse, AeroCentury has stayed bubbly.
The question now is whether it will last. As a Seeking Alpha commentator argued in December, AeroCentury today is basically a cash shell that trades at an extremely high premium to its underlying value. With the high chances that its hastily-developed metaverse game is a flop, the stock more likely than not will collapse to a price more in line with its fundamentals.
Put simply, if you own ACY stock, it’s time to take the money and run. If you don’t own, and are interested due to its meta angle, look elsewhere. There are many overhyped metaverse stocks out there, but this one takes the cake.
Vinco Ventures (BBIG)
As you may recall, BBIG stock already experienced a bubble burst last fall. This Reddit favorite, which is in the non-fungible token (NFT) business, as well as owns a stake in a video sharing platform (Lomotif) that could be a “TikTok in the making,” broke out of the penny stocks category in August and September of 2021, making it to as much as $12.49 per share.
Dropping back to the low-single digits through the rest of the year, it appeared as though this meme play wasn’t going to make a comeback. Yet so far in January, it’s gone on another incredible run. Since Jan. 10, when it was trading for around $2.20 per share, it zoomed back up to $5.50, and is now back down to $3.50 per share.
Admittedly, its latest cycle of meme mania could continue. With Reddit’s WallStreetBets community circling it as a short squeeze play, it may make it back to its past high. So, should you buy it and ride the wave?
I wouldn’t. Sure, we may see a repeat of its parabolic run experienced five months back. But buying it for this reason is nothing more than a wager on investor psychology.
Mainly, because Vinco Ventures remains a stock that’s hard to analyze based on its fundamentals. The company continues to have a complex structure. Heavy shareholder dilution is a red flag as well. With the strong chance it tumbles again once this latest short squeeze finishes up, steer clear.
Penny Stocks: Gevo (GEVO)
With the election of Joe Biden as President in 2020, it wasn’t just electric vehicle (EV) stocks that flourished on the prospect of a more “green friendly” administration. Other alternative energy stocks, like this producer of renewable fuels, went on a tear.
Trading for around $1 per share in November 2020, GEVO stock rocketed to as much as $15.57 per share in 2021. In large part on hope and hype the President would quickly implement his green agenda. Shares pulled back throughout the year, as it became clear that sweeping changes to America’s energy policies were going to take time.
Gevo is down big from its all-time high, as it trades for around $3 per share. But a series of partnerships with large companies, for example Archer-Daniels-Midland (NYSE:ADM), have enabled it to continue punching above its weight valuation-wise. At its current share price, it has a market capitalization of $800 million. This comes despite trailing twelve month sales of just $1.2 million.
In time, as the push to go carbon-neutral continues, Gevo could someday find big demand for its renewable jet fuel and other “green” energy products. Yet as it continues to get its business operational, burning through millions in the process, expect it to continue sliding to much lower prices.
Insignia Systems (ISIG)
A struggling provider of marketing solutions for the consumer packaged goods industry, shares in Insignia Systems took off last month. First, on news it was exploring “strategic alternatives” (i.e., a sale of the company). Then, as traders caught wind of its high short interest, on its appeal as a squeeze.
Between these two factors, ISIG stock moved up to around $20 per share, and has stayed there over the past few weeks. On a split-adjusted basis, it hasn’t been at these levels since 2015. That said, I wouldn’t count on it staying strong at multi-year highs.
Its underlying business continues to flounder. Even as it tries to grow the digital end of its business, the “old school” areas of marketing for packaged goods are its bread-and-butter. Think in-store ads and displays at grocery stores. In this industry, it faces heavy competition from larger rivals, like Neptune Retail Solutions (formerly News America Marketing).
Similar to BBIG stock, ISIG stock will likely fall back once the squeeze mania surrounding it dissipates. If it falls back to past price levels (between $5 and $10 per share), it may be worth a second look, as it’s a possible takeover target and turnaround plays. At today’s inflated prices though, there’s not much value.
Penny Stocks: MicroVision (MVIS)
Unlike most of the names discussed above, the bubble with MVIS stock has already burst. Skyrocketing in price late last year, and early this year, on its plans to become a provider of lidar self-driving technology, said bubble popped last summer.
Why? It became clear that investors overestimated how quickly MicroVision would become the next Luminar (NASDAQ:LAZR) or Velodyne Lidar (NASDAQ:VLDR). Yet while it’s taken a more than 87% dive from its 52-week high, I wouldn’t count on it bouncing back anytime soon.
Instead, expect the bubble that emerged around it to continue to deflate. Chief executive officer Sumit Sharma talked a good game when he spoke with our Joanna Makris last October, about his company and its strategy in the battle for lidar dominance. Since that interview, however, the company has made little in progress in areas like locking down an automotive partner.
Barring a big announcement out of left field, MicroVision appears set to continue disappointing investors. The company’s current market capitalization of around $500 million today remains entirely built around its fading lidar dreams. It may be on the road back to $2 per share, more than 33% below today’s prices (slightly over $3 per share). That’s what it traded for before this would-be catalyst emerged.
OCGN stock, a Covid-19 vaccine play, is another name where the bubble has already burst. That happened shortly after Covaxin, the vaccine candidate this company plans to market in the U.S. and Canada, obtained an Emergency Use listing (EUL) from the World Health Organization (WHO), back in November.
Briefly trading for prices above $15 per share during that time, shares have since cratered to around $3 per share. But like some of the abovementioned bubbly penny stocks, Ocugen is still flying high compared to where it was before it became popular.
For reference, before it struck a deal with Covaxin’s developer, India-based Bharat Biotech, this floundering biotech firm was trading for around 30 cents per share. It may not fully get back down to that price level. Although it appears more than likely it will be unable to bring Covaxin to the American and Canadian markets, the hype surrounding it last year enabled it to raise a lot of cash.
Still sitting on $107.4 million, its cash pile is worth 54 cents per share. Also, it may find some success with the rest of its pipeline. Even so, this isn’t enough to keep it at $3 per share. A continued drop is likely in its future.
Penny Stocks: Phunware (PHUN)
Traders early to the party certainty had some fun with Phunware stock last October. As InvestorPlace’s Samuel O’Brient reported at the time, its big run-up came about due to a supposed association between it and another popular meme play, Digital World Acquisition (NASDAQ:DWAC).
DWAC of course is the special purpose acquisition company (SPAC) that’s taking former President Donald Trump’s Trump Media and Technology Group (TMTG) public. Phunware, which among other things is in the mobile development business, did some work on Trump’s 2020 reelection campaign.
The rumor mill took this fact, and ran with it. Seeing this as a sign that Phunware would be involved with TMTG’s Truth Social platform, shares skyrocketed nearly 24x. Shares have collapsed since then, dropping more than 86% since then. With this, you may assume the bubble that emerged around it has completely deflated/popped.
But at around $2.5 per share, PHUN stock is still up more than 3x from where it was before it became a meme stock. Although there’s potential with its blockchain segment, and its revenue is expected to more than double this year, what remains of its Trump-related hype is likely what’s keeping it at today’s prices. As this factor continues to dissipate, it’s at risk of giving back all of its recent gains. If you own it, cash out pronto. If you don’t own it, there’s no reason to at present price levels.
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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.