I believe that there are penny stocks to buy in Q2 for a potential double from current levels.
The first quarter of 2023 has not been easy for money making. However, based on company and industry specific tailwinds, there have been penny stocks that have surged by over 100%.
For example, Riot Blockchain (NASDAQ:RIOT) stock skyrocketed by 280% as Bitcoin (BTC-USD) trended higher.
My focus is on penny stocks that represent companies with decent fundamentals. In my view, it would be unwise to buy purely speculative penny stocks in current market conditions. Speculative stocks make more sense during times of euphoria.
If we look at specific themes, gold trades above $2,000 an ounce and gold miners can deliver strong quarterly earnings. Bitcoin is also strong and it’s likely that the positive momentum will sustain.
Similarly, few electric vehicle stocks seem deeply oversold even as business developments remain positive. Focusing on these themes, let’s talk about three penny stocks to buy for Q2.
| KGC | Kinross Gold | $5.18 |
| BITF | Bitfarms | $1.28 |
| PSNY | Polestar Automotive | $3.83 |
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) stock trades just above $5 and has trended higher by 30% in the last one month. I believe that this dividend-paying penny stock is poised for a big rally as gold price realization improves.
From a fundamental perspective, Kinross ended 2022 with a liquidity buffer of $1.8 billion. Further, for Q4 2022, the company reported free cash flow of $157.5 million. Even at this rate, Kinross should have for FCF in excess of $600 million for 2023.
It’s also worth noting that Kinross returned $455 million to shareholders through dividends and buybacks. I expect KGC stock re-rating on healthy dividend growth in 2023.
The company has also guided for stable production through 2025. With gold trending higher, the revenue and cash flow outlook remain bright. It would not surprise me if Kinross pursues acquisitions considering the financial flexibility.
This might compensate for the sale of Russian assets in 2022 because of geopolitical reasons.
Bitfarms (BITF)
Bitfarms (NASDAQ:BITF) stock has been on fire and has surged by 183% for year-to-date 2023. The rally was however from deeply oversold levels and BITF stock remains attractively valued.
\With Bitcoin trading near $30,000, I expect strong quarterly numbers to trigger another bout of rally.
From a fundamental perspective, there are several reasons to like Bitfarms. First, the company has deleveraged significantly and as of February, total debt was $23 million.
This is 86% lower as compared to June 2022 debt levels. Additionally, Bitfarms reported $38 million in cash and digital assets.
The company has been pursuing healthy mining expansion. As of March 2023, Bitfarms reported 4.8EH/s in mining capacity. The company has guided for capacity boost to 6EH/s by the end of the year. However, considering the rally in Bitcoin, I expect additional capacity growth.
It’s also worth noting that Bitfarms is a low-cost miner. Through 2022, the company reported positive adjusted EBITDA. I expect strong EBITDA margin expansion and cash flow upside in the coming quarters.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) stock touched lows of $3.1 towards the end of March. Currently, the stock trades higher by 24% at $3.9. I believe that the worst is over for PSNY stock and a sharp rally is impending.
Recently, Polestar reported Q1 2023 sales volume of 12,000 vehicles. The company has reaffirmed its guidance for 80,000 vehicle deliveries in 2023. This is one reason to be bullish.
It’s also worth noting that the company will commence production of Polestar 3 in summer. Additionally, Polestar 4 has been revealed at the Shanghai auto show. It’s likely that the company will commence aggressive expansion in China. With an attractive pipeline and global expansion plans, I expect vehicle deliveries to remain robust beyond 2023.
Polestar reported widening of operating level losses in 2022 on a year-on-year basis. I however don’t see it as a major concern with the company in an investment stage. With deliveries growth, operating leverage is likely to kick-in and boost EBITDA margin.
On the date of publication, Faisal Humayun did not hold (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.
