Penny stocks are a notoriously volatile stock class. And with inflation concerns growing worse by the month, penny stocks could feel like a bridge too far at the moment. Interest rates are rising, putting pressure on riskier asset classes in general.
There’s little arguing that penny stocks are in prime position to spike currently. While the general environment isn’t favorable for penny stocks, there’s always hope. In this case it’s the hope that the individual stocks listed below have powerful enough catalysts. Those catalysts are enough to keep prices moving up despite the broader woes.
That’s the general idea anyway. Anytime I write about penny stocks, I include the caveat that accurate predictions are very difficult in this stock class. The notion to never risk more than you can lose holds doubly true here.
That said, the stocks listed below do have plenty of potential. Most have reasonably strong business fundamentals behind them. So, let’s get into each individually.
- Esports Entertainment (NASDAQ:GMBL)
- 23andMe Holding (NASDAQ:ME)
- Exela Technologies (NASDAQ:XELA)
- Marin Software (NASDAQ:MRIN)
- Pangaea Logistics Solutions (NASDAQ:PANL)
- Clear Channel Outdoor (NYSE:CCO)
- Mesa Air (NASDAQ:MESA)
Penny Stocks to Blast Off: Esports Entertainment (GMBL)
Esports Entertainment is a company that operates in a burgeoning online gambling industry. The best place to begin trying to understand the firm is revenue. Esports Entertainment’s most recent earnings point to a company that is growing rapidly.
Those earnings were released back on Nov. 15. They showed that the firm recorded $16.4 million in revenue, up 86% over the $8.8 million in revenues during the previous quarter. Online gambling carries much lower overhead costs than many other industries. Consequently, Esports Entertainment was profitable during the period. It posted a $10 million gross profit in the period.
Those are certainly encouraging numbers, but a stock’s price can’t be sustained on past performance alone. Fortunately, it appears that GMBL stock will be underpinned by increasing revenue moving forward. The handful of analysts covering Esports Entertainment expect those $16.4 million in revenues last quarter to rise to $21.31 million in the upcoming quarter. Growth between 2022 and 2023 is similarly attractive.
Other news includes a spate of partnership announcements out of the company. On top of that, the firm announced that it will be paying a monthly dividend of eight cents to holders in January, February, and March.
23andMe Holding (ME)
Investors have become accustomed to headlines over the past few years heralding advances in genetic research. The theory goes that as more and more information emerges about the genome, the better equipped society will be to understand and treat disease. ME stock is a play on that general idea.
23andMe Holding’s business is geared toward the individual. It offers a range of genetic testing kits that return results about the individual’s genome. In total the company had a total customer database of 11.9 million genotyped customers.
Rather than characterizing 23andMe Holding as a company with a high chance of blasting off this year, I’d say it should grow steadily.
The company is improving its fundamental business. That will result in a capital influx at some point. Revenues continue to improve steadily, while net losses improve. Revenues increased 14.6% through the six months of 2021, while losses improved by 18.6%. That same pattern was true in Q3 alone, and through the first three quarters of 2021.
23and Me still recorded a net loss of $16.52 million in Q3. But at the rate it is improving there will be a breakeven in the near future. That, combined with the genomic testing narrative, gives it potent catalysts.
Penny Stocks to Blast Off: Exela Technologies (XELA)
When my colleague Josh Enomoto wrote about Exela Technologies a few months ago, his take was particularly prescriptive: “On the face of things, Exela Technologies might appear as a low-priced speculation play that could turn in a surprise performance down the line. Specializing in business process automation (BPA) software and intelligent workplace systems, XELA stock is tied to a relevant industry, especially once a return to normal (or somewhat normal) occurs.”
His description of its appeal as an investment still rings true several months later. Xela Technologies’ attraction is the broad idea that businesses continue to benefit greatly from efficiency gains due to automation. Exela Technologies sells its software at increasing volumes, and viola, XELA stock surges.
However, it must be mentioned that faith is necessary here. The company recently stated that it expects annual cash flows to improve by $50 million in 2022. It also expects its substantial debt load — $1.355 billion — to be reduced to $1 billion in the same period. Believing that requires faith.
That faith is echoed by Wall Street and the two analysts that cover the equity. They both rate it a buy, giving it an average target price of $3.50. That’s attractive and worth a gamble at current prices of 82 cents.
Marin Software (MRIN)
Marin Software is a digital display advertising management software firm. That’s a mouthful. Essentially, the firm focuses on helping users increase their digital ad spend across various channels. That includes paid social, ecommerce retail, paid search, apps and display across multiple industries.
The company claims that “Customers typically experience a 20-30% lift through a combination of increased volume and improved efficiency when they start using MarinOne Autopilot.” That’s great for users, and generally a positive for investors. But investors are likely more interested in how that translates to Marin Software’s bottom line.
Unfortunately, the company’s most recent results weren’t that encouraging. Revenues decreased 9% on a year-over-year basis. Further, projections for the December quarter were lacking as well.
So, then why should investors believe MRIN might rise this year? The answer is a combination of growing relationships with important channels and Wall Street expectations. There’s only one analyst who currently has coverage of MRIN stock, who has assigned it a $14 target price.
The other piece of news is a growing relationship with LinkedIn and optimization tools for advertisers on that platform. It’s a speculative play, but one that could rise quickly.
Penny Stocks to Blast Off: Pangaea Logistics Solutions (PANL)
The longer the pandemic wears on, the more acutely we all become aware of the outsized role shipping and logistics plays in the economy. Supply chain disruptions are very much a big factor in our current inflation troubles.
Pangaea Logistics Solutions is a maritime cargo firm focused on dry bulk goods transportation. The company operates a fleet of up to 60 vessels from offices in Newport, Rhode Island; Copenhagen; Singapore and Athens.
In the case of Pangaea Logistics Solutions, the primary focus is on industrial commodities transportation. Think things like coal, iron ore and bauxite, for example. Perhaps these aren’t the sexiest industrial goods to consider, but what’s important is that demand is there, and revenues are high.
In Q3, Pangaea Logistics Solutions recorded $27 million in net income, up from $7.6 million a year prior. That sharp spike is likely attributable to a gradual easing of pandemic restrictions. But it also points to a massive spike in demand for the firm’s services.
Clear Channel Outdoor (CCO)
Clear Channel Outdoor is an outdoor advertising firm with 500,000 displays spanning 26 countries. So, that means it may have a strong catalyst this year with an economic opening leading to increased revenues. In other words, as more traffic populates the roads, Clear Channel Outdoor will see greater demand.
In fact, that trend is already well underway. Clear Channel Outdoor recognized a 33.3% increase in revenues for the three months ended Sept. 30. The trend was particularly strong across the firm’s Americas segment, where revenues increased by 42.6% during the period.
Sales growth is predicted to increase by 37% in the current quarter, 39.2% in the next quarter, and 14.5% in 2022 overall. Those numbers indicate that CCO stock could rise substantially. Analysts expect that CCO shares should rise above $4 in the future. That makes it attractive at current prices below $3.
Penny Stocks to Blast Off: Mesa Air (MESA)
Mesa Air is a discount, regional carrier that operates flights on behalf of larger partners. Those partners include American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and DHL (OTCMKTS:DPSGY).
Basically, the argument for investing in MESA stock is to catch another reopening trade. This time via a penny stock airline. TSA throughput numbers are still currently down vis-a-vis 2020 data for this time last year as well as 2019 data.
The firm will release earnings information on Feb. 9, which are important. If they’re strong, MESA stock should get a boost. However, it is equally important to simply note that share prices could rise as TSA throughput rises as well.
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, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.