Penny stocks have had a great start this year, but with uncertainty starting to rear its head again, investors have started to choose safer options instead. Indeed, the underlying businesses of most penny stocks are loss-making startups that depend on external sources to survive in the long run. That’s not very reliable in an environment where a recession is likely on the horizon, coupled with a hawkish Federal Reserve that is yet to give any clues as to when they might stop hiking rates. There is also the possibility of a debt crisis, but both parties are likely to reach an agreement on the debt ceiling like they always have.
Conversely, I would point out that not all penny stocks are bad right now. There are many small businesses that are sustainable and have tremendous growth potential over the coming years. These businesses have been overlooked by Wall Street in this harsh environment, and buying them at the trough now could deliver multibagger gains on the way up.
With that in mind, here are three of the best penny stocks with millionaire-making potential by 2025:
Cinedigm (CIDM)
Cinedigm (NASDAQ:CIDM) is a compelling play for investors who are looking for exposure to the streaming industry, especially in niche segments. The industry has faced headwinds in recent years when it comes to profitability – but I believe most streaming companies are simply returning to their long-term growth trajectory after the boom in 2021.
Nonetheless, Cinedigm is different from most media companies as it has continued to accelerate in growth. The company does not rely much on advertising revenue and instead uses a subscription model. That has allowed the company to nearly double its revenue last year from $27.9 million, up 98% year-over-year. An impressive feat, as most of its peers had a pullback.
Positive earnings and very little debt also accompany this strong sales growth. But why the bearish sentiment in the stock market?
That mostly has to do with CIDM stock trading below the Nasdaq listing requirement of $1. Bears fear that a reverse split could lead to more dilution of the stock and I definitely agree. But it should also be considered that the stock price is heavily suppressed considering the strong underlying business. The strength has allowed the company to announce a share repurchasing program of 10 million shares, a rarity among businesses of this size.
CIDM can also avoid a reverse stock split by getting an extension from Nasdaq, for which a hearing is due today, as I’m writing (May 11). Even if that is unsuccessful and the near-term gets tougher, I certainly see multibagger gains by 2025 here. Analysts believe it could reach anywhere from $2-5 from its current 30 cents range by next year, though it will likely require more patience.
CarParts.com (PRTS)
CarParts.com (NASDAQ:PRTS) has also had its fair share of headwinds recently. But as I’ve mentioned in my previous articles, auto parts companies are a great bet right now due to the tough economic environment compelling Americans to keep their older cars. There is a shortage of many vehicle parts right now due to lingering supply chain problems. A rapidly aging civilian vehicle fleet coupled with a rise in auto-related crime are also key factors. Accordingly, sales growth has been positive for this company for 13 consecutive quarters.
Still, it may take some time before sales growth starts to accelerate. As the CFO states in the Q1 earnings transcript, “While some customers are choosing to defer their repairs, we believe that their return to market is inevitable once consumer confidence rebounds. At that point, we are well-positioned to meet their demands, thanks to our infrastructure, mobile-first customer experience, and diversified assortment.”
Analysts believe sales growth to 3.7% this year before accelerating to 7.8% in 2024. Wall Street also notes a 96.66% upside potential on average by next year.
Checkpoint Therapeutics (CKPT)
I’ve decided to put Checkpoint Therapeutics (NASDAQ:CKPT) at the caboose of this article since it is a speculative bet. Like most biotech startups, it is a loss-making company with negligible revenue. But it has very promising drugs in the pipeline.
Anti-cancer drug cosibelimab has shown promising results and is being reviewed for approval by the FDA. I believe approval is likely as it is better than Merck’s (NYSE:MRK) Keytruda, which was approved in January.
Thus, the average analyst price target of $35 with a 1,047% upside seems very feasible.
On the date of publication, Omor Ibne Ehsan 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.
