Penny stocks are shares of companies trading for less than $5, by definition. But what should you know about stocks priced even lower? Volatility and speculation tend to play leading roles, especially when there are active catalysts to consider. It might be rumors about a potential buyout or a direct reaction to penny stock news and corporate filings.

While most cheap stocks will typically be better suited for day traders, there are occasions where investing in penny stocks can pay off big. For instance, the popular solar company Enphase Energy Inc. (NASDAQ: ENPH) traded as low as $0.65 during the last five years. The execution story resulted in a massive windfall for early investors as ENPH stock hit new all-time highs of $308.88 this month.

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Since these low-priced stocks are looked at by day traders more than investors, chances are that most who bought ENPH at 65 cents in 2017 weren’t the same shareholders as in 2020 or even 2022. But the more than 47,000% gain during that time is a clear example of why penny stocks can be well worth the risk.

penny stocks under $3

Penny Stocks Today

Are 470x returns normal? Of course not, and in many cases, those investing in penny stocks can lose as much as 100% of their investment as many of these companies fail. But whether you’re looking for cheap stocks to trade or your next high-risk investment, the first step is research. The overall market is likely to be volatile, in general, as Jackson Hole discussions will be in focus, Topping everything off will be Jerome Powell’s 10 AM ET speech.

Ahead of Friday’s anticipated action, we look at a few of the more popular penny stocks to watch during premarket, including Inhibikase Therapeutics (NASDAQ: IKT), Baudax Bio Inc. (NASDAQ: BXRX), and Newage Inc. (NASDAQ: NBEV).

Inhibikase Therapeutics (NASDAQ: IKT)

Shares of Inhibikase Therapeutics jumped early on Friday thanks to a new update that adds to a string of company news in August. IKT stock reached highs of $1.23 before 8:30 AM ET after announcing FDA clearance of an Investigational New Drug Application for its IkT-001 leukemia treatment.

Milton H. Werner, Ph.D., President, and Chief Executive Officer, expanded on the event, saying, “Based on preclinical studies, we believe that IkT-001Pro has the potential to significantly improve the safety profile of oral imatinib, which may enhance patient adherence and quality of life, potentially leading to better rates of complete cytogenetic response. We look forward to initiating a bioequivalence study in the second half of 2022.”

The update comes just a few days after Inhibikase announced the dosing of its first patient in a Phase 2a trial of its IkT-148009 for Parkinson’s disease. With multiple pipeline candidates gaining attention this week, IKT stock could be on traders’ lists of penny stocks to watch.

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Baudax Bio Inc. (NASDAQ: BXRX)

Another premarket penny stock to watch is Baudax Bio. There weren’t any headlines to pair with the latest move. However, the after hours trading action saw BXRX stock explode beginning post-market on Thursday. Shares of the biotech company jumped from around $0.50 to highs of $1.23 during Friday morning’s extended hours session.

Something that may not be as apparent as a news headline was recent filings from Baudax. They show warrant amendment agreements with certain holders of BXRX Series A Warrants. You can see the complete list of BXRX stock filings here. Needless to say, the market seems to have reacted favorably to this development.

Besides the recent Warrants update, Baudax has gotten some additional interest after its second-quarter results. The company posted a better EPS compared to its previous year’s quarter. But more importantly, it highlighted its ANJESO injection net product revenue jumped 49% during that period. ANJESO is Baudax’s pain manamgent platform. Meanwhile, other platforms continue progressing.

Gerri Henwood, President, and CEO of Baudax Bio, explained, “The development programs for our neuromuscular blocking (NMB) agents continue to advance with the commencement of a Phase I clinical study evaluating BX2000, our ultra-short acting NMB, in healthy volunteers. We are on track to progress through the remaining dosing cohorts and expect to complete enrollment of the study by early 2023. We are also working toward initiation of a Phase II study evaluating our intermediate-acting NMB, BX1000, in surgical patients and we look forward to keeping you updated on our progress.”

Newage Inc. (NASDAQ: NBEV)

Shares of NBEV stock have surged overnight in a similar fashion to BXRX. There haven’t been any Newage headlines and the most recent fling was back on August 18th. Nevertheless, the penny stock has exploded in the stock market today as traders focus attention on some of the cheapest penny stocks under $1 right now.

One of the drivers of speculation behind NBEV is comments from earlier this summer. Newage discussed that it would evaluate strategic alternatives, including potential financial restructuring, reorganization, or even a merger or sale to build shareholder value. In many cases, companies that have fallen under heavy pressure and scrutiny will look for ways to pivot to deliver value to the market.

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Newage is working with Houlihan Lokey and SierraCostellation Partners to facilitate this transition. In a June update, Ed Brennan, NewAge’s Chairman, and interim Chief Executive Officer, commented, “Following a detailed evaluation over the past several months, we have determined that it is prudent to undertake a review of our strategic options to determine which alternative or alternatives, including our standalone plans, are in fact the best way to maximize shareholder value. We have received many communications from shareholders on their views on improving shareholder value and we are committed to ensuring we evaluate all opportunities.”

Whether or not this latest move is tied to strategic alternatives is to be seen. For now, NBEV stock is on the list of penny stocks to watch, thanks to considerable momentum early on Friday.

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