Energy stocks are a fickle bunch. More prone to economic cycles than many companies, considering massive up-front expenses usually fueled by short-term debt, their financial positioning is constantly precarious. At the same time, they don’t have the longevity and market share (in many cases) that their utility stock cousins enjoy. Worst yet, a company can collapse suddenly and without notice if its energy claim — oilfield, mine or whatever — is dry or produces less than expected.
Energy penny stocks compound those problems tenfold. A small-cap or micro-cap stock betting the farm on a niche energy source, product or service could go bust the second demand dissipates or legislation limits what they can do.
At the same time, promising energy penny stocks can quickly explode in value on just a hint of good news. Better yet, if that news ends up panning out to be a long-term benefit, today’s energy penny stocks could easily become tomorrow’s energy staples.
Ballard Power Systems (BLDP)
Ballard Power Systems (NASDAQ:BLDP) is a fuel-cell manufacturer targeting a unique market — heavy automotives like buses and trains alongside portable power solutions like those seen on construction sites. Relying on fickle retail consumer demand can cripple a company when market and business cycles swing out of favor, as we’ve seen with Tesla (NASDAQ:TSLA) in recent months. But by targeting enterprise-level clients first, Ballard entrenches itself in a reliable series of industries that serve to anchor future pivots.
Earlier this month, Ballard locked an order for more than 177 hydrogen fuel cell engines for buses across Europe. The contract marks the largest deployment of hydrogen fuel-powered buses in the continent and represents a pivotal moment for the long-standing energy penny stock leader.
For some, Ballard’s rapid cash burn represents a real concern. But, as the company’s recent earnings report highlighted, management is trying to mitigate that burn. At the same time, the company’s debt-free balance sheet means it isn’t overburdening itself with unsustainable leverage in today’s high-interest rate climate.
NexGen Energy (NXE)
NexGen Energy (NYSE:NXE) is an energy penny stock leveraging what could be the future of sustainability — uranium. Uranium, in general, and NXE are very speculative plays within energy penny stocks. Still, the company’s unique position could translate to 10-bagger success in the coming years, even if its current financial standing isn’t great.
Despite zero profitability and limited short-term prospects, industry analysts are shockingly bullish on NXE’s prospects. Price targets range as high as $8.39 per share, representing more than 35% upside from today’s pricing. Focused primarily on exploration today, NXE could be a huge stock in coming years as increased focus on sustainability reigns supreme. More governments and individuals are recognizing that electric and lithium battery-powered solutions are more damaging to the environment than originally thought. Likewise, nuclear lobbying efforts reveal that the power source might be the best bet for a truly green future. If that future pans out, this energy penny stock might be one of the biggest winners.
ClearSign Technologies (CLIR)
ClearSign Technologies (NASDAQ:CLIR) is an energy penny stock bridging the gap between legacy fossil fuels and a sustainable future. The company develops emission control tech to help oil and gas companies manage their carbon footprint and meet regulatory requirements. Those requirements are increasingly restrictive, meaning CLIR has a clear future ahead as companies adapt to changing demands.
The company’s tech slashes emissions by more than 80% without the massive costs associated with other systems. ClearSign is tiny, and its relative size suits its penny stock status. But on the heels of its first few product sales, its revenue could quickly snowball. Newly deployed tech will effectively serve as a “proof of concept” for other firms to notice, creating a flywheel effect that could turn ClearSign into a moneymaking machine.
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On the date of publication, Jeremy Flint held no positions (directly or indirectly) in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.