7 Speculative Penny Stocks to Watch for Massive Upside
Speculative penny stocks, or risky stocks trading for $5 per share or less, can produce big gains, but they can also lead to big losses. As such, not only is position-sizing key. It is imperative to select names in this category that offer sufficient potential reward to outweigh the risk.
However, out of thousands of penny stocks that trade either on a major exchange, or in the over-the-counter market, there are plenty that fit the bill. We can break these down into two categories.
First, there are names in “penny stock territory,” that trade at a low valuation, because of uncertainty over future results. Finding the situations where the market has discounted these types of stocks too much can prove profitable.
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Second, there are shares in early-stage companies, that while not “cheap” based on metrics like price-to-earnings and price-to-book, can prove to be big time bargains in hindsight, as these upstarts scale up into profitable enterprises.
With this in mind, let’s take a look at seven speculative penny stocks. Each one fits into either of these categories, and represents a great opportunity at current prices.
Bitfarms (BITF)
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With Bitcoin (BTC-USD) prices surging recently, it’s no surprise that shares in cryptocurrency mining stocks like Bitfarms (NASDAQ:BITF) have become popular again among investors.
While oftentimes even more volatile than BTC itself, crypto mining stocks can be in some cases well worth the risk.
Now may be such a time. Given how this is a business with high operating leverage (i.e. high fixed costs, low variable costs), moderate incremental increases in the price of BTC could vastly improve the company’s prospects, leading to outsized gains for BITF stock.
If BTC keeps surging following the upcoming halving event, and Bitfarms continues to increase its hash rate (Bitcoin mining capacity), Bitfarms could experience a dramatic swing in profitability. Forecasts already call for the company to report earnings of 50 cents per share next year. Not too shabby, given how BITF changes hands for $2.24 per share .
The Honest Company (HNST)
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The Honest Company (NASDAQ:HNST) is one of the speculative penny stocks I’ve been, and continue to be, bullish about. The status of this household products company as a takeover target for a strategic acquirer was what initially piqued my interest.
However, more recently, my bull case for HNST stock has hinged more on the company’s turnaround efforts. As seen with recent developments/price action, this turnaround-based bull case has continued to play out. Earlier this month, shares rallied sharply, after the company’s latest quarterly earnings release.
For Q4 and the full year 2023, The Honest Company reported a steady increase in revenue. More importantly, during Q4, Honest swung to profitability, indicating that its transformation efforts are starting to have a major impact on fiscal performance. Trading for around $4.15 per share , if this trend continues, HNST may not be a penny stock for long.
Innovative Food Holdings (IVFH)
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Innovative Food Holdings (OTCMKTS:IVFH) a purveyor of specialty food products, both as a wholesaler as well as directly to consumers. For many years, this OTC-listed penny stock languished because of poor operating results.
IVFH stock, however, has been on a tear since late 2022. During this time frame, shares have increased in value by nearly fivefold, from 20 cents to around $1 per share. Yet while this may suggest that it’s too late to pounce on this under-the-radar opportunity, fortunately that may not be the case.
At least, that’s the view of one online commentator specializing in undervalued penny stocks. Per the commentator, as Innovative shuts down its unprofitable direct-to-consumer unit, freeing capital tied up in warehouse real estate and inventory, IVFH will transform into an asset-light business trading at a relatively low valuation.
With this, a further re-rating may take shape, sending this rebounder to even higher prices.
NovaGold Resources (NG)
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Bitcoin isn’t the only U.S. dollar alternative that’s been surging recently. Spot gold prices have rallied as well. ‘
There are many speculative penny stocks to buy that will give you exposure to a possible continued gold bull market, but very speculative NovaGold Resources (NYSEAMERICAN:NG) is one name in particular to consider.
This gold miner has no revenue and its primary asset, a 50% interest in the Donlin Gold project in Alaska, is still years from commercialization. On the flip side, however, NG shares have barely budged despite the big gold run-up.
If the miner makes more progress moving toward the commercialization stage (forecasts call for annual gold production of 1 million ounces), and if gold prices keep rising, NG (which just a few years back traded for above $10 per share) could experience a big price rebound.
Payoneer Global (PAYO)
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Payoneer Global (NASDAQ:PAYO) is a fintech firm, which specializes in cross-border payments. Through its platform, users can collect and remit payments globally.
In a world where remote work and decentralization is increasingly the norm, this leaves the company well-positioned to continue growing at a steady pace.
But even with this long-term tail wind on its side, PAYO stock trades at what can be considered a relatively low valuation (23.7 times forward earnings) for a fast-growing fintech firm. Or, as a Seeking Alpha commentator recently put it, PAYO is “priced for disaster.”
Admittedly, the release of underwhelming guidance last month helps to explain why the market has discounted PAYO’s valuation.
Still, with expectations now set low, a wave of positive surprises with regards to quarterly results may are ahead. Following PAYO’s recent return to “penny stock territory,” you may want to take advantage, and grab a position.
Talkspace (TALK)
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To say that Talkspace (NASDAQ:TALK) is one of the volatile, speculative penny stocks is an understatement. Going public via a special purpose acquisition merger in 2021, shares in this virtual therapy company sank like a stone in the months following the de-SPACing.
Trading at $10 per share in June 2021, TALK stock was down to sub-$2 per share price by the end of that year. In the years since, shares have fallen to sub-$1 per share prices. Over the past year, however, Talkspace has been bouncing back with a vengeance.
During 2023, revenue surged by more than 25%. Revenue could grow by another 23%-30% during 2024. Talkspace is also expected to report positive adjusted EBITDA this year. Even after surging from 426.4% over the past twelve months, further improvements to fiscal performance could send TALK back above $5 per share, and beyond.
Vaso (VASO)
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Vaso’s (OTCMKTS:VASO) days as a penny stock are numbered. That is, this OTC-listed medical technology company announced back in December plans to enter a SPAC merger with Achari Ventures Holdings Corp I (NASDAQ:AVHI). This deal is set to close sometime in the near future.
However, as I’ve argued previously, there’s still massive upside potential, even when AVHI stock becomes the “new” VASO stock, which will presumably debut near AVHI’s original SPAC price ($10 per share). Why is there big upside potential? As I have argued previously, it all has to do with what makes this SPAC merger differ from typical deals.
Unlike most SPAC deals, which entail taking an unprofitable, privately held firm public, this deal is effectively serving as a reverse-split and up-listing for a consistently-profitable business. Vaso trades for only 4.4 times forward earnings, the market’s re-rating post-deSPACing could be substantial.
On the date of publication, Thomas Niel held Bitcoin. He 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
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