Bullish on Energy? Take a Look at These 4 Penny Stocks
Energy penny stocks of all types have had a wild week of trading during the end of March. On Monday, energy stocks were down. Tuesday, they bounced back up, and through the rest of the week, the sentiment has been mostly bullish.
Some of the week’s largest movers, like Enphase Energy (NASDAQ: ENPH) and Sunworks (NASDAQ: SUNW), saw 15% and 30% gains, respectively, since March 29th. While these companies focus on clean energy, they also show that investors feel confident in the future of the energy industry as a whole.
This week, President Biden announced an eight-year plan that will offer $2 trillion in funding to bring the U.S. toward renewable energy. He states that the plan is to get the U.S. 100% carbon-free within the next few decades.
This ambitious plan will not only set in motion the course for renewable energy businesses but the entire energy sector as a whole. Since clean energy infrastructure is not yet capable of providing the country fully with renewable power, the demand for fossil fuels remains high in the meantime.
Traders Look For Energy Penny Stocks to Buy Right Now
While Biden’s announcement has had a bullish effect on alternative energy penny stocks, it also has caused high volatility in the sector overall. On the flip side, fossil fuel energy companies have seen a rise in value this week based on the price of oil, without the extreme volatility seen with renewables.
So as we see, there is a clear two-sided coin here. Both fossil fuel energy and renewable energy penny stocks could have a place in your portfolio. But, it all comes down to picking the right ones. For this reason, here are four energy stocks that you might want to take a look at. Will they be on the list of penny stocks to buy?
- Tellurian Inc. (NASDAQ: TELL)
- Centennial Resource Development Inc. (NASDAQ: CDEV)
- Kosmos Energy Ltd. (NYSE: KOS)
- NexGen Energy Ltd. (NYSE: NXE)
Penny Stocks to Buy [or Avoid] #1. Tellurian Inc.
Tellurian Inc. is a more traditional oil and gas company. It provides liquefied natural gas or LNG to a broad range of export markets. While LNG adoption is not nearly what it could be, many companies are working to build out industrial infrastructure to aid in its popularity. Although short-term trends for TELL stock have been up and down, since the beginning of the year, sentiment has been mostly bullish.
To continue growing, Tellurian is focused on increasing the amount of LNG it can produce. What’s more, as many, including Tellurian, have explained, LNG can be a viable way to access energy while lowering the carbon footprint. This is because LNG has a lower carbon output than traditional fossil fuels. It’s also why many are calling it a “bridge fuel,” bridging the gap between traditional fossil fuel and renewable energy.
In order to expand, Tellurian announced earlier in 2021 that this summer it would begin the $16.8 billion Driftwood LNG Export project. The recent bullish sentiment surrounding TELL could be a reflection of this very sizable project. Considering this announcement, analysts at Wolfe Research upgraded TELL stock to an outperform rating.
It also gave TELL a $5 price target. At around $2.50 per share on April 1st, this represents a 100% increase. While it may take a lot to reach this price target and support the higher valuation that comes with it, Clean Energy is proving to be a growing energy resource. Yes, infrastructure still needs to be built out, but hopefully, TELL can play a large role in the industry’s future.
2. Centennial Resource Development Inc.
One energy stock that is coming close to leaving penny stock territory right now is Centennial Resource Development Inc. Its recent price movements can be correlated to the volatile price of oil in the past few weeks.
This is because Centennial Resource is a direct exploration and production company working in the oil industry. The company is a pure-play energy penny stock. With this comes a high degree of exposure to the ups and downs of the price of oil. Last week’s movement for CDEV stock can be traced to the massive ship lodged in the Suez Canal. Because oil tankers use this pathway daily, investors assumed that lower supply would lead to higher prices. But soon after, fears grew, and prices dropped.
While the shipping path is open now, investors are unsure of the lasting effects that this could have. Most likely, things will get back to normal. It’s worth noting that events like these can have a swift effect on the price correlated energy stocks.
Despite this event, Centennial Resource continues building its cash position. It recently raised around $150 million through a senior note offering. With these funds, investors seem confident in the financial situation of CDEV moving forward. Additionally, these funds will be used to enter into several capped call transactions and the redemption of its current 8% second lien senior secured notes, due in 2025.
The market isn’t the only thing bullish on CDEV stock. Analysts at Johnson Rice recently boosted their rating. Previously, the firm had an “accumulate” rating, which was upgraded to a “Buy.” There’s also a $13.50 price target. Considering shares finished out at $4.48 this week, their CDEV stock forecast is right around 200% right now.
For those who look for technical cues, I won’t get too detailed or over the top. But if you’re looking at historic levels, the last time CDEV stock was trading around this level was back in early 2020. Given the focus on energy stocks recently, it will be interesting to see if CDEV stock can firmly break above this level if sentiment remains bullish.
3. Kosmos Energy Ltd.
If you’re searching for a well-funded energy penny stock to watch, Kosmos Energy just completed an upsized offering worth $450 million. With any energy company, financing is always the most crucial tool for growth. Kosmos is an offshore drilling company engaged in operations around the world.
Its key assets are located in Ghana, Equatorial Guinea, and the Gulf of Mexico. With these three asset locations, Kosmos pulled in north of $366 million in revenue during its most recent fourth quarter. Although its EPS dropped year-over-year by 33% to $0.12, the company states that this is due to the pandemic’s impact.
In mid-February, analysts at Moody’s gave an outlook of Stable for KOS. It believes that Kosmos’ commitment to producing high-quality oil in large quantities, should help it to remain stable moving forward. In addition Moody’s states that KOS has “relatively low base decline rates, balanced geographic exposure in West Africa and the U.S. Gulf of Mexico, a solid track record of organic and acquisition driven growth, and a visible pipeline of low-risk development projects.”
You’ve also got analysts, including Goldman Sachs and Johnson Rice, upgraded KOS last quarter. Both also have a $4.50 price target on the energy penny stock.
This is another example of testing historic levels on the chart above. KOS stock is right around the same it briefly traded last June. You can see it immediately pulled in shortly after. This time around, KOS stock has actually established a trading channel around this level, albeit on lower volume than in June. Given the sentiment in energy stocks and infrastructure, KOS could still be one of the active penny stocks to watch right now.
4. NexGen Energy Ltd.
While NexGen is not a producer of fossil fuels, it is in the growing uranium industry. We’ve been covering uranium penny stocks like NexGen for quite some time due to the recent clean energy emphasis.
Following Biden’s speech a day earlier, shares of NexGen and other clean energy penny stocks are up on April 1st. In a White House fact sheet released yesterday, the document stated that “President Biden’s plan includes an immediate up-front investment of $16 billion that will put hundreds of thousands to work in union jobs plugging oil and gas wells and restoring and reclaiming abandoned coal, hard rock, and uranium mines.”
While the gain from this is speculative, this quote shows the potential that uranium could have in the future. Based in Canada, NexGen acquires and explores various assets in North America. This includes the uranium-rich Athabasca Basin in Canada. In this Basin, NexGen holds a 100% interest in the famed Rook I project, where the Arrow Deposit is located.
NexGen has raised over $172 million in proceeds in the past few months. Because of this, NXE should have plenty of funding to develop and build out the Rook I project. The last thing to consider is NexGen’s sizable stake in IsoEnergy Ltd. IsoEnergy has been making major progress in the past few weeks, which could be considered as added value for NXE shareholders. It’s also worth mentioning that the levels that NXE stock has traded at since February are at their all-time high levels. So for renewable energy-focused investors, NXE could be worth watching.