In my view, it’s the best time to grab undervalued penny stocks for multibagger returns.
The first reason for this view is the point that rate cuts are impending in the second half of 2024. Easy money policies translate into higher interest (and speculation) in growth and penny stocks. I therefore expect the markets to be supportive in the coming quarters.
The second reason is focus on most undervalued penny stocks to buy in April that these companies have potential catalysts. If these catalysts pay-out in the coming quarters, these emerging companies will grow at a stellar pace and create value.
I must add that the initial horizon for these undervalued penny stocks is until the end of 2024. However, as these stories develop, the investment horizon can be expanded for 5x to 10x returns.
Let’s talk about the factors that make these penny stocks worth considering.
Ring Energy (REI)
With oil trending higher, Ring Energy (NYSE:REI) is among the most undervalued penny stocks to buy in April. There are multiple reasons to be bullish on oil for the coming quarters. First, rate cuts are impending and that’s likely to boost industrial commodity and energy prices.
Further, OPEC and allies have maintained their stance on production cut. Escalating geopolitical tensions are also likely to support oil on the upside. It’s therefore a good time to accumulate oil and gas stocks.
Ring Energy looks attractive at a current market valuation of $413 million. The PV10 (present value of future oil revenues, net of direct cost) of Company’s assets stands at $1.65 billion. Further, with higher realized oil price, Ring Energy is positioned to deliver EBITDA margin expansion and cash flow upside.
It’s also worth noting that the Company has pursued multiple acquisitions in the last few years. This has ensured that production growth remains robust. A combination of higher production and an increase in realized oil price will imply stellar growth.
Tilray Brands (TLRY)
In the last few months, I have talked about Tilray Brands (NASDAQ:TLRY) in multiple instances. It’s worth noting that in the last one month, TLRY stock has skyrocketed by 59%. In my view, the rally from deeply oversold levels is likely to sustain.
With Presidential elections due in November, I expect significant price action in the cannabis industry. It’s worth noting that Germany recently legalized cannabis. Further, the U.S. Food and Drug Administration has recommended reclassification of cannabis as a Schedule III drug. It’s likely that federal level legalization of cannabis will be a part of the election promise. Therefore, things seen optimistic on the regulatory front and that the reason for TLRY stock trending higher.
At the same time, financial developments have been positive for the Company. In Q2 2024, Tilray reported revenue growth of 34% on a year-on-year basis to $194 million. Growth was fuelled by the international medicinal cannabis segment. With Q3 2024 results due next week, I am expecting further upside in the stock backed by strong numbers.
Bitfarms (BITF)
Bitfarms (NASDAQ:BITF) is among the most attractive Bitcoin (BTC-USD) miners to buy. While the crypto currency has surged for year-to-date, BITF stock has declined by 25%. The primary reason for this correction is equity dilution with the Company raising $375 million. With ambitious expansion plans, I believe that BITF stock will make a strong comeback after some consolidation.
At the end of 2023, Bitfarms reported hash rate capacity of 6.5EH/s. The Company is planning to increase capacity to 21EH/s by the end of 2024. This will translate into healthy revenue growth. Further, with Bitfarms being a low-cost Bitcoin miner, I expect significant EBITDA margin expansion and cash flow upside.
It’s also worth noting that Bitfarms has a zero-debt balance sheet. Therefore, there is ample financial flexibility to plan the next leg of expansion for 2025. If this is associated with new highs for Bitcoin, I expect BITF to deliver multibagger returns in the next 18 months.
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.
