The speculative mania of 2020 and 2021 that spilled over to penny stocks has long left the scene. Many names in this category, which consists of stocks trading for under $5 per share, zoomed higher during this era.
Since the frenzy started to end in late 2021, names in penny stock territory have performed poorly. Out of 1,740 of stocks trading under $5 per share tracked by Finviz.com, only 11 are trading at between zero percent and 10% below their respective 52-week high.
Having said that, there may be a few in this bunch that are worth a closer look. At least, based on the fact they currently have active “buy” ratings from Wall Street sell-side analysts.
Analysts, of course, aren’t oracles. They often make the wrong call. But in some situations, their bullishness for these seven penny stocks could be a sign that there’s opportunity the market is sleeping on.
|HIMS||Hims & Hers Health, Inc.||$3.76|
|OPAD||Offerpad Solutions Inc.||$3.48|
|PAYO||Payoneer Global Inc.||$4.02|
Penny Stocks: Canaan Inc. (CAN)
China-based Canaan Inc. (NASDAQ:CAN) is one of the largest makers of Bitcoin (BTC-USD) mining machines. With crypto winter still raging, that may not sound as impressive as it did as recently as seven months ago, when BTC hit an all-time high.
The BTC bear market has had an impact on the performance of CAN stock. Trading for over $10 per share last November, it trades for less than $4 per share today. Even so, according to one sell-side analyst (Benchmark’s Michael Legg), it’s an opportunity at today’s prices. On June 8, Legg gave it a “buy” rating and a $9 per share price target.
His rationale? Canaan’s merits as an indirect way to wager on Bitcoin’s continued growth. If you can stomach the risk (including delisting risk, like with other Chinese stocks), and are bullish on crypto’s future, you may want to buy.
From late 2020 to early 2021, renewable fuels company Gevo (NASDAQ:GEVO) went on an incredible run. Shares zoomed from under $1 per share, to briefly above $15 per share. The election of President Joe Biden spurred a short-lived mania for clean energy stocks.
Today, GEVO stock is back in the penny stocks category. Clean energy has fallen to the president’s back burner. Changing market conditions have also dampened the appeal of speculative growth stocks such as this one. Yet while it was issued four months ago, a “buy” rating on the stock from Citigroup analysts has made the case why it may be a worthwhile “high risk, but high reward” type of opportunity.
Giving it a $5 per share price target, Citi’s analyst team cited how the company, which produces renewable natural gas and sustainable aviation fuel, could become cash-flow positive by either 2023 or 2024.
Hims & Hers (HIMS)
Telehealth and wellness play Hims & Hers (NYSE:HIMS) has fallen sharply since it went public, via a special purpose acquisition company (SPAC) merger, in January 2021. While spiking shortly after publicly traded, a plunge in the appeal of telehealth plays resulted in it giving back these gains, and a whole lot more.
Currently, HIMS stock trades for less than $4 per share, which is a far cry from its all-time high of $24.46 per share. It’s also well below its SPAC debut price of $10 per share. Still, this plunge may mean it’s a good entry point for a new position.
In April, analysts at Guggenheim gave it a “buy” rating, and a $10 per share price target. Another firm that month, Credit Suisse, reiterated its own bullish rating. Reporting strong growth, and upping its outlook, Hims and Hers may be on track to meet/beat expectations set in its SPAC merger presentation.
Penny Stocks: Nokia Oyj (NOK)
While technically a penny stock (as it trades for less than $5 per share), calling Nokia Oyj (NYSE:NOK) one is misleading. The Finland-based telecom equipment provider is a large enterprise, generating nearly $25 billion in annual sales.
Although in the penny stock category, most of the stocks discussed above and below aren’t in its league. However, it’s worth noting, as it’s a low-priced stock that’s received positive analyst coverage this year. Three months ago, Raymond James analyst Simon Leopold gave it a “buy” rating, and a $6.50 per share price target, thanks to its “improving competitive position.”
Analysts at Jeffries have also given it a “buy” rating, citing strong demand due to the 5G rollout. After its brief time as a meme stock last year, NOK stock has since delivered a middling performance. This could change, if it makes more progress with its turnaround.
Offerpad Solutions (OPAD)
With the hot housing market cooling down fast, it may seem like a bad time to buy a stock like Offerpad Solutions (NYSE:OPAD). A real estate “ibuyer,” it’s gone from generating revenue of around $1 billion in 2020 to an estimated $5.21 billion.
Despite this high growth, investors have shunned the stock as the market watches closely for signs of a slowdown in the residential housing market. A hard landing could be bad news for Offerpad. It could end up being underwater on the homes it has purchased for fast re-sale.
Yet one analyst, JMP Securities’ Nicolas Jones isn’t as pessimistic. He has maintained his “market outperform” rating, while cutting his price target from $12 to $8.50 per share. If housing market fears are overblown, it’s possible OPAD stock is oversold today. If that’s your view, take a closer look at this real estate penny stock.
Payoneer Global (PAYO)
Payments company Payoneer Global (NASDAQ:PAYO) is yet another name hammered by shifting sentiment on fintech stocks. It’s also another of the many SPAC stocks that have dropped to prices well below their original $10 per share price.
Nevertheless, there may be merit in going contrarian on PAYO stock as fintech stocks, SPAC stocks and in particular fintech SPAC stocks, are out of favor. As seen in its most recent quarterly results, it’s growing at a healthy pace (36% year-over-year revenue growth). In contrast to many other high growth stocks, which have posted higher revenue, but higher losses, the company is also making progress in terms of profitability.
In March, Needham analyst Mayank Tandon reiterated his “buy” rating on Payoneer, giving it a $7 per share price target. A fintech play that’s possibly more promising than investors today give it credit, it may be worthwhile as a speculative buy.
Penny Stocks: Transocean Ltd. (RIG)
Like Nokia, Transocean Ltd. (NYSE:RIG) is a large company that happens to have a low stock price. A provider of offshore contract drilling services, the big run-up in oil and gas prices have only had a modest impact on its performance.
It’s up nearly 7x from its 2020 lows, but over the past year it’s only up 10%. Even so, you may not want to assume that it’s run out of runway. As my InvestorPlace colleague Faisal Humayun recently argued, high energy prices could mean greater demand, and higher day-rates, for Transocean’s services.
This could mean greater improvement in its results than currently expected. In turn, another big move higher for RIG stock. Humayun is not the only one bullish on shares. Back in February, Evercore ISI analyst James West maintained an “outperform” rating on the stock, giving it a $6 per share price target.
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 held a LONG position in BTC. He did not hold (either directly or indirectly) any positions in the other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.