Don’t be afraid to buy penny stocks just because someone says you shouldn’t & here’s why:
Just because someone on a message board site or social media group says penny stocks are a scam, doesn’t mean they’re right. Countless micro-cap hedge funds would greatly disagree. And make sure that if you do choose to buy penny stocks, you treat it like any other investment.
If you think these microcap stocks are your lotto ticket to millions, just remember the last time you played the lottery and made a million bucks. Chances are, that event is pretty infrequent. But, side note, if you’re winning a million-dollar lottery every day let me know because I would love to know your secret. All jokes aside, back to the question:
Can You Make Money With Penny Stocks?
The answer is yes but make sure you stick to a plan. For those who had a plan and acted on it, they’ve been able to make significant gains by investing in penny stocks.
Need an example? Check out one $0.65 stock in 2017 that is now trading for over $20 today. What was the best penny stock to buy in 2017? Take a look at Enphase Energy (ENPH).
This Penny Stock Outperforms The Broader Market, Up 3,067% Since 2017
Solar energy hardware provider Enphase Energy Inc has made early buyers of this penny stock a lot of money since 2019. Furthermore, in 2019, the stock has gained as much as 305%. And since May 2017, ENPH stock is up by more than 3,000%. That means an investor had this on their list of penny stocks to buy at $0.65 made 30 times their money. And as you can see from the chart, this move wasn’t overnight nor was it a move on light volume. What that suggests is that the company fundamentals have been just as much of a contributing factor as the share structure or penny stock technical indicators.
When a stock rises so much, so quickly, it’s only natural for investors to get interested. But it’s also important to note that such a rise can also make many investors skeptical. After all, there is always the possibility that the market might be priced in future growth a bit too aggressively and hence, it is perhaps necessary to take a closer look at the Enphase’s stock. After all, the stock is at its all-time high.
A Penny Stock Turnaround Story
The company had been struggling for many years and had been weighed down by both losses and debt. However, a turnaround came about last year after its IQ 7 microinverters found favor among a range of clients in the solar power industry. The revenues generated from the product saw the company swinging back into profit in 2018 as it generated $1.8 million in net profits.
The previous year, Enphase had recorded a loss of $39.3 million. The momentum has continued into 2019 as well and in Q1 2019, the company generated operating income to the tune of $7.1 million. In addition to that, the operating cash flow ballooned by as much as 407% to hit $17 million and hence, the surge in the stock is perhaps not a complete surprise.
Projected Earnings Still Pointing Toward Strength
This is no longer a penny stock but you can see the potential that the “unicorn penny stocks” have shown over the years. ENPH stock is clearly one of them. The company is projected to generate revenues of $500 million in 2019 and margins could be as much as 10%.
The better margins will also allow Enphase to invest heavily in newer products like IQ7 X and IQ 8. Solar power installations in the United States is also rising steadily and according to latest data, solar energy generation rose by as much as 12$% in Q1 2019 from the levels in the same quarter in 2018.
Despite the current optimism about the company, it needs to be pointed out that on paper it’s worth only $14 million. Although the business is growing steadily, the company would need to strengthen its balance sheet considerably. These are factors that investors should keep in mind.
Shares of ENPH were up again on Tuesday and hit a new all-time high of $20.59. And to think that this was just $0.65 just 2 years ago.
