The markets have recently gained momentum, with the S&P 500 trending roughly 15% higher for the year. In general, any market rally starts with blue-chip stocks, and the bullish momentum spreads to growth and penny stocks. I am not suggesting that the global economy is out of the woods quite yet. However, in my view, now is a great time to accumulate some of the best penny stocks with high return potential. That’s because if this mini-rally turns into a full-blown bull market, most of the stocks mentioned on this list will already be overvalued.
When we look back to 2021, select penny and meme stocks delivered 1,000% returns in no time at all. I would keep expectations realistic, and I believe that the stocks discussed can generate these returns in 24 months. That is, if everything works according to plan.
However, the most important point to note with the stocks on this list is that these are companies with strong fundamentals. Their stock prices might be low, but they’re generally far from what I would consider to be an ultra-speculative stock.
Let’s discuss the reasons to be bullish on these top penny stocks to buy.
| BITF | Bitfarms | $1.45 |
| SUNW | Sunworks | $1.08 |
| CURLF | Curaleaf | $3.17 |
Bitfarms (BITF)
There seems to be some momentum coming back to Bitcoin (BTC-USD), with the cryptocurrency surging in recent weeks. A dovish stance by policymakers, and Bitcoin halving in 2024, are two big catalysts for the cryptocurrency. Assuming a scenario where Bitcoin trades above $50,000 next year, Bitfarms (NASDAQ:BITF) stock is poised to deliver 1,000% returns.
My view is underscored by the fact that Bitfarms has already surged 245% this year. This massive rally points to the stellar return potential the stock holds. The reason for this upside potential is Bitfarms’ status as a low-cost Bitcoin miner, with sustained upside in mining capacity. A big rally for Bitcoin would therefore imply robust EBITDA margin expansion and cash flow upside for investors.
Additionally, Bitfarms has a strong balance sheet. With $41 million in liquidity and debt of just $17 million, the company is well-positioned for aggressive expansion.
Sunworks (SUNW)
Sunworks (NASDAQ:SUNW) is another penny stock with high return potential over the next 24 months. As an overview, Sunworks is a provider of high-performance solar power systems. With the company catering to the residential and commercial power segment, there is undoubtedly a big addressable market.
Sunworks has been delivering strong numbers in terms of revenue growth. For Q4 2022, the company reported revenue and gross profit growth of 69% and 61%, respectively, on a year-over-year basis. However, the stock has trended lower as the company continues to report EBITDA losses.
I see growth continuing in the coming quarters, and that’s a key catalyst for the stock. The first reason to be positive is the company’s order backlog of $87 million as of Q4. With additional operating leverage, I expect Sunworks’ EBITDA margin to improve. Furthermore, the company has indicated that its cost inflation will decline in the coming quarters. This will also provide a boost to its EBITDA margin numbers.
With positive industry tailwinds and the prospective of EBITDA margin expansion, SUNW stock is attractive for investors seeking multibagger returns.
Curaleaf Holdings (CURLF)
If we look at cannabis stocks, Tilray Brands (NASDAQ:TLRY) has slumped by 35% in the last one month. For the same period, Cronos (NASDAQ:CRON) has traded sideways. However, Curaleaf Holdings (OTCMKTS:CURLF) stock has trended higher by 18% over this period.
There are two reasons for the rally. First, there is still not certainty around federal level legalization of cannabis in the United States. However, states continue to legalize the use of cannabis. This is a big catalyst for Curaleaf, with the company already operating in 21 states. Reports indicate that the U.S. cannabis market will hit $71 billion by 2030 even without federal reforms. Therefore, Curaleaf has ample headroom for growth. I must add that the company is also present in eight European countries.
Furthermore, Curaleaf has been investing heavily in research and development. That’s one factor that sets the company apart from peers. Currently, the company has 15 new products in its pipeline being prepared for launch. Additionally, more than 50 products are in the front-end innovation process. As these products are launched, revenue growth is likely to accelerate.
Penny Stocks
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.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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.
