Irrespective of market conditions, investors are attracted towards penny stocks in the quest for multibagger returns. However, just because the stocks are cheap doesn’t you you shouldn’t be wary of bad investments. It’s unlikely that purely speculative names will be among the millionaire-maker penny stocks. The focus must be on undervalued penny stocks that represent good businesses.
Further, there will be impending industry or company specific catalysts that need to be clearly identified. The risk here is that if these catalysts don’t play out, the stock returns will be subdued or negative. However, if the catalyst is triggered, 10x or 20x returns will not out of the question.
The bottom-line: Invest what you can afford to lose in these undervalued millionaire-maker penny stocks. I am, however, optimistic that the stocks discussed represent companies where there is a high probability of the catalyst being triggered.
Let’s discuss three undervalued penny stocks and the specific factors that may spell stellar returns.
Cronos (CRON)
The big impending catalyst for the cannabis industry is federal-level legalization. If this scenario holds true, Cronos (NASDAQ:CRON) will skyrocket, and I expect at least 10x returns in quick time. Even without federal level legalization, CRON is a deeply undervalued stock.
As of Q2 2023, Cronos reported cash and equivalents of $841 million. The company’s cash buffer is higher than the current market valuation. Cronos intends to use the cash for aggressive expansion in the United States on federal-level legalization. At the same time, the cash will be utilized towards research and development to broaden the product portfolio.
It’s also worth noting that Cronos has pursued cost-cutting initiatives. This includes the decision to exit the U.S. hemp business. The company expects to end the current financial year with the cash position swelling further. Being successful in arresting the cash burn is a major positive that will impact valuations.
Solid Power (SLDP)
For Solid Power (NASDAQ:SLDP) stock, multibagger returns depend on the company’s ability to commercialize solid-state batteries. If the company is successful in its research and development initiatives, 10x or 20x returns would not be surprising.
I strongly believe that Solid Power is one of the best bets in the solid-state battery segment. Of course, commercialization is still a few years away. However, Solid Power seems to be making the right moves.
One reason to be bullish is the fact that Solid Power has strong automotive partners. This includes Ford (NYSE:F) and BMW (OTCMKTS:BMWYY). In December, the company licensed its cell design and manufacturing process to BMW. The idea is to pursue parallel research and development.
Solid Power will also be delivering EV battery cells to automotive partners in 2023 for validation testing. Potential approval of solid-state batteries by automotive majors can be a big catalyst for stock upside.
Bitfarms (BITF)
For year-to-date 2023, Bitcoin (BTC-USD) has trended higher by 77%. For the same period, Bitfarms (NASDAQ:BITF) stock has skyrocketed by 258%. This puts into perspective the upside potential for this Bitcoin miner.
Furthermord, the basic assumption for BITF stock being a multibagger is a continued rally in Bitcoin. It’s important to note that Bitcoin halving is due in 2024, and a big upside might be impending. Standard Chartered believes that Bitcoin will quadruple by the end of 2024.
If this scenario holds true, BITF stock will skyrocket. Specific to Bitfarms, there are two reasons to be bullish. First, the company has been adding mining capacity on a sustained basis. As of July, mining capacity was 5.3EH/s.
Further, Bitfarms expects to have zero debt in its balance sheet by February 2024. Additionally, the company reported a liquidity buffer of $48 million as of Q2 2023. With high financial flexibility, the company is positioned for aggressive expansion. This will translate into robust revenue growth and cash flow upside.
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.
