Investing in blue-chip stocks is boring but rewarding. Long-term value creators among blue-chip stocks demonstrate the power of compounding. On the other hand investing in growth and penny stocks seems exciting since they’re associated with higher volatility. Of course, it comes with the baggage of high risk and therefore the portfolio should be well diversified.

As the markets inch closer to the new year, there are hopes of multiple rate cuts globally. Besides supporting economic growth, lower interest rates are also positive for asset markets. I expect the S&P 500 index to remain in an uptrend next year. Further, if the overall sentiment is bullish, there can be significant price action among penny stocks.

This column will discuss three penny stocks that are likely to skyrocket in 2024 and move beyond the penny stock classification. The risk of investing in these stocks is high. However, the fundamentals and business outlook for companies representing these penny stocks are positive.

Let’s discuss the reasons to be bullish on these exciting penny stock names.

IAMGOLD (IAG)

IAMGOLD (NYSE:IAG) is among the top penny stocks to buy for a big rally next year. It’s worth noting that for year-to-date, IAG stock has remained sideways. A breakout on the upside is imminent after an extended period of consolidation. However, it’s not just technicals that point to a rally for IAG stock. There are two fundamental factors to be bullish.

First, multiple rate cuts are expected in 2024 and this is bullish for gold and precious metals. As a matter of fact, gold is already trading above $2,000 an ounce. As gold trends higher, the company is likely to benefit from higher realized prices and therefore robust upside in free cash flows.

Further, IAMGOLD has some quality assets with the project pipeline including Côté, Gosselin, Nelligan and Chibougamau district. Among these, the Côté project is 90% completed and will provide a production bump-up in 2024. This will further support revenue and cash flow growth. I must add here that with a liquidity buffer of $1 billion, IAMGOLD is positioned to invest aggressively in exploration and production.

Bit Digital (BTBT)

Bit Digital (NASDAQ:BTBT) stock is another interesting name among penny stocks that’s a potential multibagger. For year-to-date, BTBT stock has skyrocketed by roughly 400%. However, I believe that this Bitcoin (BTC-USD) miner will continue to trend higher as sentiments turn positive for cryptocurrencies. I would also add here that Bit Digital is more than just a Bitcoin mining Company.

The first point to note is strong fundamentals. As of September, the company reported $72.9 million in cash and digital assets. Further, with zero debt, financial flexibility is high for organic growth. For Q3 2023, Bit Digital reported revenue of $11.6 million with 403.1 Bitcoin mined for the quarter. Further, the hash rate was 3.7EH/s.

I am however more excited about the company’s new venture, Bit Digital AI. The business will provide specialized infrastructure to support generative artificial intelligence workstreams. The company is targeting to be a leading provider of infrastructure-as-a-service to Europe, the Middle East, and Asia. As this business gains traction, BTBT stock is likely to surge. Further, a higher Bitcoin price will ensure a healthy cash flow upside from the mining business.

Tilray Brands (TLRY)

After a deep correction, Tilray (NASDAQ:TLRY) stock has been sideways, amidst volatility, for almost seven months. Given the business developments, I expect a breakout rally for this cannabis penny stock that looks deeply undervalued.

Tilray, through multiple acquisitions, has established itself as the fifth-largest craft beer brewer in the United States. It’s expected that the craft beer market will grow at a CAGR of 7.2% through 2030. Tilray is positioned to benefit from this strategic diversification.

At the same time, the company is delivering encouraging results from the cannabis business. For Q1 2024, the Canadian and International cannabis revenue increased by 16.5% and 37% respectively. International growth was driven by the medicinal cannabis segment. Tilray has also guided for positive adjusted free cash flow for the financial year 2024.

Amidst these positives, TLRY stock looks deeply oversold. I expect healthy consolidated results in the coming quarters, which will be a catalyst for a big rally.

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.