The definition varies with countries but in the U.S., a penny stock is one which is trading under $5 and is often referred to as a micro-cap. A micro-cap is a company whose market capitalization is between $50 million and $300 million. These stocks trade mostly over the counter, rather than on main U.S. exchanges. But there are exceptions. You can find a few trading on the main exchanges as well, either U.S. or overseas or both.
A chief pushback against penny stock investing is the illiquid nature of most stocks. In other words, often there isn’t adequate trading volume and you can’t easily find a buyer if you are looking to sell.
Penny stock investors at times are taken for a ride by promoters, who operate with the intent of pumping and dumping. There have been instances where sponsors of these stocks may not have a legitimate company or viable business model. They play with the greed of investors and dupe them with the promise of superlative returns or by spreading false rumors. Once the stock is pumped up, these fly-by-night operators dump the stock and flee the scene.
The odds may be stacked up heavily against penny stock investing. But penny stock investing is not without its merits. The biggest allure is their affordability. And if you are lucky enough to zero in on a safer bet among penny stocks, you stand to take home superlative, or at least decent returns. Also, the current market downturn has pushed stocks of many companies with viable businesses into penny market territory. This gives us one more reason to take a look at penny stocks.
Here are a few penny stocks that I would recommend as relatively safer investment options. As always is the case, with any investment, I would remind investors that all recommendations should be carefully considered and weighed against your investment objectives.
|ASMB||Assembly Biosciences, Inc.||$2.09|
|SOLO||Electrameccanica Vehicles Corp.||$1.29|
|ADN||Advent Technologies Holdings, Inc.||$2.83|
|BRDS||Bird Global, Inc.||$0.53|
Penny Stocks: Assembly Biosciences (ASMB)
San Francisco, California-based Assembly Biosciences (NASDAQ:ASMB) is a clinical-stage biotech developing therapies for hepatitis B virus and other viral infections. HBV infection is currently treated with suppressive treatments, resulting in very low cure rates. This infectious disease currently affects about 296 million people worldwide, more than twice the number of people suffering from hepatitis C infection and human immunodeficiency virus (HIV) infection.
The company’s most advanced product candidate is vebicorvir and it is in mid-stage development in two different triple-combo formulations. BeiGene (NASDAQ:BGNE) has in-licensed the rights to develop and commercialize the product in mainland China.
Interim Phase 2 readout from the two Phase 2 studies are expected in the second half of 2022.
Apart from this, the company is developing next-generation core inhibitor product candidates ABI-H3733 and ABI-4334. Assembly Biosciences estimates the global HBV market opportunity at $3 billion, with $900 million of it attributable to the U.S. alone.
The average analysts’ price target for Assembly Biosciences stock is $10.88, according to TipRanks.
New York-based Boxed (NYSE:BOXD) was set up in 2013 as a business that can ride the crest of the e-commerce momentum. The company is an e-commerce grocery platform that sells bulk consumables. It also licenses its e-commerce software to enterprise retailers.
The company grew its revenue by 14.1% year-over-year to $46.6 million in the first quarter that ended in March 2022. Grocery sales accounted for about 95.3% of the total compared to the 4.7% from the software and services business. The latter segment, however, reported about 127% growth, markedly faster than the 14% growth for the retail business.
Boxed is confident of carrying forward the growth momentum. It expects B2B demand to increase amid the reopening. The bulk-sized cost savings and convenience could be pulling points for its business in the inflationary environment, Boxed’s chief executive officer and co-founder Chieh Huang suggested in the company’s first-quarter earnings release. He is also confident of continued growth in its software & services segment.
Finally, we remain focused on investing in the advancement of our technology, which will support growth of our Software & Services business across the globe.
The $12 average analysts’ price target for Boxed shares suggests potential for over 700% upside from current levels.
Electrameccanica Vehicles (SOLO)
Canada’s Electrameccanica Vehicles (NASDAQ:SOLO) is a manufacturer of three-wheeled, purpose-built, single-seater electric vehicle named “Solo” that is meant to revolutionize urban commutation.
The Solo EV, priced at $18,500, drives at a top speed of 80 miles per hour and it can be charged through a 110-volt standard outlet. Given its small build, parking becomes easier. The company pitches its EVs to fleet drivers, who usually drive solo.
By the end of the first quarter, the company cumulatively sold 400 Solo vehicles and it is in the process of ramping up production. For the first quarter, the company recorded revenue of $1.05 million, over 400% Y-o-Y increase, and a loss of 15 cents per share.
Electrameccanica is all set to commence production from its Mesa, Arizona plant in the U.S. by the end of the year. This would bring more capacity online and also provide the company a toehold into the U.S. market.
Analysts, on average, expect the company’s stock price to hit $7.50.
Penny Stocks: NextNav (NN)
Mclean, Virginia-based NextNav (NASDAQ:NN) is a provider of next-generation global positioning system (GPS) that would come in handy in buildings and urban areas, where satellite-based GPS signals can’t reach. Customers use the company’s urban and indoor positioning for public safety and commercial applications.
The company accomplishes this with its Pinnacle network, which delivers highly accurate vertical positioning, and TerraPoiNT network, which provides positioning, navigation and timing services. Pinnacle, according to the company, is deployed in over 4,400 cities in the U.S.
NextNav sees overseas expansion as among its opportunity set. The company is currently eyeing developed markets with similar characteristics as the U.S. It has a joint venture with Metcom to deliver its services in Japan. Additionally, earlier this year, it participated in the European Commission’s Joint Research Center alternative positioning, navigation and timing evaluation in Italy.
The average analysts’ price target of $14.63 for NextNav stock suggests there is scope for about 470% upside.
Chimerix (NASDAQ:CMRX), a Durham, North Carolina-based commercial-stage biopharma, has oncology and biodefense as its focus areas. The company has an approved product in Tembexa tablets and oral suspension as a treatment option for smallpox.
Recently, the company sold the exclusive worldwide rights to Tembexa to Emergent BioSolutions (NYSE:EBS) for a one-time payment of $225 million in cash and up to $100 million in milestone payments. This would boost the company’s cash runway.
Chimerix’ pipeline currently consists of ONC201, which is being evaluated for glioma, a tumor that occurs in the brain and spinal cord. The company plans to initiate a Phase 3 study by the year-end. Chief executive officer Mike Sherman is confident of quickly getting approval for the drug.
Given the strength of the data already presented and the extent of the unmet patient need, we still believe an accelerated approval is possible and plan to complete the work already underway to support a potential NDA submission.
Chimerix is also developing ONC206 for treating advanced primary central nervous system tumors.
The stock offers about 480% upside potential, going by the $8 average price target of analysts.
Advent Technologies (ADN)
Advent Technologies (NASDAQ:ADN) is a fuel-cell and hydrogen technology company based out of Boston. It has membrane-electrode assemblies in the U.S., Germany, Denmark and Greece. The company has grown inorganically, and in the process has become a vertically-integrated fuel-cell system company.
The company pursued a SPAC listing in February 2021 but the stock never really took off and is currently trading in penny stock territory. On June 16, the stock took flight after the company announced that Greek officials have approved funding, valued at around $821 million, for a project to develop fuel cells and electrolyzers in Greece.
Advent Tech has charted an ambitious future path for itself. It seeks to increase its revenue from $7.1 million in 2021 to over $250 million by 2025. By the same timeline, it hopes to hit gross margin of 30% and adjusted EBITDA of about $50 million.
The stock has an average analysts’ price target of $12.95.
Penny Stocks: Bird Global (BRDS)
Los Angeles-based Bird Global (NYSE:BRDS) came into the scene as a manufacturer of e-bikes and e-scooters. Additionally, the company provides fleets of shared micro EVs to riders in over 400 cities worldwide.
First-quarter results released in mid-May showed a 48% year-over-year increase in revenue to $38 million. That said, revenue has been on a downward trajectory for about three quarters now. This prompted the company to trim its full-year revenue guidance.
Realizing the tough macroeconomic and operating environment, the company announced cost saving initiatives to accelerate the timeline for achieving profitability.
Bird Global followed up with the announcement regarding the elimination of 23% of its workforce and shutdown of its consumer products division.
The average analysts’ price target for Bird Global is $5.50.
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, Shanthi Rexaline 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.