Among the key highlights of investing in 2021 was the surge in penny stocks and speculative stocks. Multi-fold returns came at the blink of an eye. However, 2022 is likely to be different. With the potential interest rate hike, there will be relative tightening of liquidity.
This does not imply that the markets are positioned for a big correction. As the pandemic shifts to an endemic, there are hopes of accelerated GDP growth. To some extent, this will offset the fears related to liquidity tightening.
At the same time, it would be unrealistic to expect a repeat performance of 2021 from penny stocks. Investors will need to tone down their expectations. However, there are no lack of attractive opportunities.
Even if penny stocks are unlikely to deliver multi-fold returns, there are stories that can double. Even a 50% to 100% return on penny and speculative stocks over a 12-month period would be more than desirable.
Let’s look at seven penny stocks that can double in the next 6-12 months.
- Borr Drilling (NYSE:BORR)
- Hive Blockchain (NASDAQ:HIVE)
- Uranium Energy (NYSEAMERICAN:UEC)
- Sundial Growers (NASDAQ:SNDL)
- Transocean (NYSE:RIG)
- Skillz (NYSE:SKLZ)
- Kinross Gold (NYSE:KGC)
Penny Stocks That Could Double: Borr Drilling (BORR)
With Brent oil trading above $80 per barrel, I expect some action in oil and gas penny stocks. BORR stock has trended higher by 47% in the last six-months. However, further upside is likely with positive news flow.
As an overview, Borr Drilling is an offshore drilling contractor. As of Q3, 2021, Borr had 28 rigs, with 17 contracted and six available for contracting. Additionally, the company had five rigs under construction.
It’s worth noting that for Q1, 2021, the company reported negative EBITDA. However, EBITDA has accelerated significantly in the last two quarters. The reason is higher utilization coupled with improvement in day-rates.
With oil remaining firm, it’s likely that the idle rigs will be contracted. This provides EBITDA upside visibility. Further, all jack-ups under construction are due for delivery in 2023. As market conditions continue to improve, the new rigs are likely to be contracted.
Recently, Borr Drilling also entered into an agreement with creditors for extension of yard debt maturities from 2023 to 2025. This will further ease the balance sheet stress for the company.
Overall, BORR stock seems poised for a meaningful rally in 2022. The company has a fleet of modern rigs and, as industry conditions improve, the growth outlook is robust.
Hive Blockchain (HIVE)
HIVE stock had touched highs of $5.75 in November 2021. However, with a meaningful correction in Bitcoin (CCC:BTC-USD), the stock has slipped to current levels of $2. I would not be surprised if the stock re-tests previous highs once Bitcoin moves higher again.
As an overview, Hive Blockchain is a diversified mining company. Besides Bitcoin, the company is also into the mining of Ethereum (CCC:ETH-USD). Like most other miners, Hive has aggressively expanded its mining capacity, which has boosted revenue growth. Strong growth is likely to sustain through 2022 with further growth in hash rate.
An important point to note is that Hive has been aggressive on the diversification front. With cash flow from mining, the company has been making strategic investments. As an example, the company reported a strategic investment in Network Media Group (OTCMKTS:NETWF). This will give Hive exposure to the NFT business. Previously, the company has made investment in the decentralized finance space.
Goldman Sachs (NYSE:GS) predicted at the beginning of 2022 that Bitcoin is likely to touch $100,000 in the next five years. If this view holds true, it’s just the beginning of growth for Hive Blockchain.
Penny Stocks That Could Double: Uranium Energy (UEC)
With focus on renewable energy sources or relatively cleaner energy sources, I am bullish on UEC stock. The International Atomic Energy Agency believes that nuclear energy capacity to double to 792 gigawatts (net electrical) by 2030. This would imply steady growth in demand for uranium. It’s worth noting that uranium price has been in a gradual uptrend.
As an overview, Uranium Energy is involved in the extraction and processing of uranium and titanium. The company claims to be production ready with the acquisition of Uranium One Americas in November 2021.
Currently, the company has 4.1 million lbs of uranium that’s warehoused. Additionally, the company is holding 118,000 acres in Wyoming’s uranium producing Power River and Great Divide Basins. With a strong resource base, valuations are likely to adjust on the upside.
It’s also worth noting that the company has $120 million in cash and equivalents. There is ample financial flexibility for strategic investments and developing the asset.
After surging to highs of $5.49 in November 2021, UEC stock has corrected to current levels of $2.61. This looks like a good opportunity to accumulate before another rally. With the company being production ready, revenue growth will be the catalyst for upside.
Sundial Growers (SNDL)
Among penny stocks that trade below $1, SNDL stock looks interesting and is likely to double in the next 12-months. Cannabis stocks have been in a sell-off mode after President Joe Biden’s election-driven rally. However, it seems that most stocks in the sector are trading at attractive levels and the selling is overdone.
For Sundial Growers, there are several possible catalysts. The company’s investment division generated income in excess of $20 million in 2021. With a $571 million cash buffer to be deployed in various investment opportunities, the segment can be a long-term cash flow provider.
Additionally, Sundial has its own brands and with the company expanding retail presence in Canada, there is potential for growth. It’s also worth noting that Sundial has exclusively focused on Canada for growth. Once cannabis is legalized at the federal level in the United States, there is likely to be bigger growth opportunities.
Overall, Sundial might be a penny stock. However, the company seems to be making the right investment and acquisition decisions. Once EBITDA growth gains traction, returns can be multi-fold.
Penny Stocks That Could Double: Transocean (RIG)
From the oil and gas sector, RIG stock is another name to consider. After being sideways for 12-months, it seems that the stock is on the verge of a break-out. With Brent oil trending higher, Transocean is positioned for further improvement in the order backlog.
As an overview, Transocean has a fleet of 39 floaters. The company’s fleet is 100% focused on ultra deep-water and harsh environment. As of December 2021, Transocean reported an order backlog of $7.1 billion.
The backlog provides medium-term revenue and cash flow visibility. With a modern fleet, the company’s rig utilization is likely to remain robust considering the current oil price trend.
From a financial perspective, the company has a total liquidity buffer of $2.7 billion. This is likely to support the investment requirements for the next 12-24 months.
Another point to note is that the company’s EBITDA margin has witnessed improvement in the recent past. With higher day-rates, it’s likely that margin will continue to improve. This will help in deleveraging the balance sheet.
I personally didn’t expect that SKLZ stock would be among the penny stocks. However, after a massive correction of 91% from highs, I am willing to consider some contrarian bet on the stock.
It’s also worth noting that business developments have been positive in the recent past. In January 2022, Skillz announced that the company has launched in India. The mobile gaming market in the country is expected to be worth $5 billion by 2025. It’s likely that this launch will help in supporting monthly active user growth in the coming quarters.
Further, Skillz has a healthy balance sheet. As of Q3, 2021, the company reported cash and equivalents of $540.3 million. Additionally, the company raised $300 million from a senior note offering in December 2021. The financial flexibility allows the company to make strategic investments.
As an example, the company invested in Exit Games in Q3, 2021. This investment will help in supporting multiplayer synchronous racing, shooting and fighting games. Skillz has also made significant investment in marketing and sales. This has still not shown the desired impact from the perspective of user growth. However, with geographical expansion, investments are likely to deliver results.
Therefore, I would be cautiously optimistic on SKLZ stock. If there are a few positive indicators from the upcoming results, a sharp reversal rally is likely.
Penny Stocks That Could Double: Kinross Gold (KGC)
Even with the rate hike factor, gold has remained firm around $1,800 an ounce. It’s unlikely that gold will witness any meaningful correction considering the inflation factor. KGC stock is among the attractive gold mining stocks to consider.
The stock trades at a forward price-to-earnings-ratio of 8.75 and also offers investors an attractive dividend yield of 2.2%.
Another reason to like Kinross Gold is the production upside visibility. For 2021, the company reported production of 2.1 million oz. For the current year, production is expected to increase to 2.7 million oz. and further to 2.9 million oz. in 2023.
Even if gold price remains stable, the company has revenue and cash flow upside visibility. It’s also worth noting that as of September 2021, Kinross reported a total liquidity buffer of $2.1 billion. Recently, the company announced the acquisition of Great Bear Resources (OTCMKTS:GTBAF) for a consideration of $1.4 billion. Acquisition can further boost the company’s production outlook for the next few years.
For 2021, Kinross Gold has also guided for an all-in-sustaining-cost of $1,110 an ounce. Therefore, with gold likely to remain above $1,800 an ounce, there is clear visibility for healthy EBITDA and free cash flows. These factors make KGC stock among the attractive penny stocks to consider for 2022.
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On the date of publication, Faisal Humayun did not hold (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.