With so much volatility in the stock market today, you may consider penny stocks an option. These stocks are typically priced under $5 and are known for extreme price fluctuations. They are also known for their potential for high returns. With that, they come with significant risks. This article looks at a few more penny stocks under $5.
What Are Penny Stocks?
First, let’s define penny stocks. These are stocks of usually smaller companies that trade for relatively low prices per share. Because of their small size and limited liquidity, penny stocks are often subject to extreme price fluctuations. Yes, that also means they can be manipulated by unscrupulous traders. This makes them a risky investment option and why due diligence and research matter.
At A Glance: Advantages & Disadvantages Of Penny Stocks
One of the main advantages of investing in penny stocks is the potential for high returns. Since these stocks are “cheap,” even a small increase in price can mean considerable gains. For example, a stock priced at $0.50 per share could double in value from just a 50-cent move. The slight jump is worth a 100% return on investment. Of course, the reverse is also true. Losses can be substantial if the stock price goes down.
One of the most significant risks is that these stocks tend to have low liquidity. It can make it more difficult to exit trades at an optimal price. It also is easier for unscrupulous traders to manipulate the stock price. As we saw earlier this week, though it isn’t thinly traded by any means, AMC Entertainment (NYSE: AMC) saw its share price get manipulated by someone spreading unconfirmed rumors about the company’s involvement with Amazon (NASDAQ: AMZN). This can lead to significant losses for investors unaware of the risks.
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Another risk of investing in penny stocks is that these companies are often small and may have limited resources. This means they may be more vulnerable to market downturns or changes in the regulatory environment. Additionally, because these companies are not as widely followed as larger companies, it can be more challenging to obtain reliable information about their financial health or growth prospects.
Are Penny Stocks Worth It?
Should you invest in penny stocks? The answer depends on your individual investment goals and risk tolerance. If you’re looking for high-risk, high-reward investments and are willing to research, penny stocks may be a suitable option for you.
However, you may want to consider other options if you are looking for more stable, low-risk investments. Whichever side you’re on, we’re taking a closer look at a handful of companies turning heads in the stock market this week. It also continues the list of penny stocks from the article, 4 Top Penny Stocks Under $5; Time To Buy Now?
Penny Stocks To Watch
Ardelyx Inc. (ARDX)
Shares of ARDX stock have been on the list of penny stocks to watch for months. The price extension has been powered by Ardelyx and its series of major milestones. One of the more significant came before the start of 2023. The company reported an FDA committee backed its kidney disease drug candidate and recommended its approval. The FDA also granted Ardelyx an appeal for its treatment candidate, Xphozah, and a Complete Response letter for a New Drug Application.
A mix of solid performance from these milestones may have also led to a bullish outlook from analysts. Wedbush, for example, upgraded the penny stock to Outperform and raised its price target to $6. While recent earnings results and the accompanying business update helped bring more upward momentum for the stock, there’s something that could be stoking speculation. In particular, Ardelyx said it plans to resubmit its application seeking FDA approval of Xphozah early in the second quarter.
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Considering that we are at the end of Q1 and the start of Q2, the timing of this proposed event has come back into focus. Mike Raab, president and chief executive officer of Ardelyx, explained earlier this month that the company will execute its plans for “a successful launch of XPHOZAH, if approved, and create opportunities to expand our business to support the next phase of the company’s growth,” and that, “As evidenced by our continued success with IBSRELA, we are well on our way to realizing our mission to discover, develop and commercialize novel mechanism products for patients with unmet medical needs.”
Cidara Therapeutics Inc. (CDTX)
Another one of the biotechnology penny stocks on the watch list this week is Cidara Therapeutics. CDTX stock is still trying to recover from a significant sell-off earlier this month that took it from 52-week highs of $2.10 to recent lows below $1. The progress over the last two sessions has helped shares uptick back above $1.20 thanks to some bullish interest focused on recent insider activity.
CEO Jeffrey Stein picked up 50,000 shares at an average price of $1.0371 this week. The insider trading action came shortly after Cidara announced that the FDA approved its antifungal Rezzayo (rezafungin) under priority review for treating candidemia and invasive candidiasis. Jeffrey Stein, Ph.D., also explained in an update that this approval allows Cidara to receive a $20 million regulatory milestone payment under the terms of its agreement with Melinta Therapeutics. Melinta holds the right to commercialize Rezzayo in the U.S.
Unfortunately, this milestone was overshadowed by Cidara’s lackluster earnings results for the further quarter and full-year 2022. But, since the dust seems to have settled, the news has come back into focus among the Fintwit and Reddit retail trading communities.
ImmunityBio Inc. (IBRX)
Like Cidara on this list of penny stocks, ImmunityBio has faced heavier selling pressure in the stock market this year. Most of February saw IBRX stock bleed out and reach 52-week lows of $1.21. Why would anyone start watching it at the end of March?
The latest catalyst seems to have brought back optimism to the penny stock (for now). Earlier this month, ImmunityBio announced its continued engagement in ongoing discussions with the FDA. These discussions include a proposed label for a product candidate under review. It also explained that the company is exploring partnering with a “large biopharmaceuticals company” to commercialize its N-803 bladder treatment. N-803 also had a license application submitted to the FDA for the indication.
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As the market awaits the outcomes of several potential events, speculation may be driving momentum. Since hitting 52-week lows, IBRX stock has climbed back by as much as 55%.
List Of Penny Stocks
- Ardelyx Inc. (NASDAQ: ARDX)
- Cidara Therapeutics Inc. (NASDAQ: CDTX)
- ImmunityBio Inc. (NASDAQ: IBRX)
- Olaplex Holdings (NASDAQ: OLPX)
- Faze Holdings (NASDAQ: FAZE)
- Altimmune Inc. (NASDAQ: ALT)
- Silvergate Capital (NYSE: SI)
