Introduction to Penny Stocks
When it comes to stock trading, penny stocks stand out, captivating many with the promise of substantial returns. These stocks, often priced under $5 per share, belong to smaller companies and typically don’t trade on the major stock exchanges. However, that doesn’t mean you won’t find plenty of Nasdaq and NYSE-listed stocks under $5. Their affordability makes them an attractive option for many investors. As with any investment, they come with their unique set of challenges and risks.
Reasons to Find Penny Stocks To Trade
The primary attraction of penny stocks is the potential for high returns. A small uptick in the stock’s value can result in impressive profits due to the low initial investment. Moreover, their affordability means that investors can purchase a substantial number of shares without committing a large sum. This provides an excellent opportunity for portfolio diversification, allowing investors to venture beyond traditional blue-chip stocks and explore new avenues.
However, it’s essential to approach penny stocks with a balanced perspective. While they offer diversification and affordability, they also come with a unique set of challenges. Their price might be low, but the associated risks can be considerably high, especially for the uninitiated.
How To Buy Penny Stocks
Before diving into the world of penny stocks, thorough research and education are paramount. The market is rife with stories of overnight successes, but there are equally many tales of significant losses. Potential investors should start by familiarizing themselves with the basics. Numerous online resources, courses, and books can shed light on the intricacies of penny stock trading.
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Choosing a broker is the next crucial step. Not all brokers facilitate penny stock trading, so it’s essential to select one that supports these cheap stocks. Once you’ve zeroed in on a stock, employ both technical and fundamental analysis to gauge its potential. Look for robust financials, a transparent business model, and favorable industry trends. Given the inherent volatility, starting with a modest investment is advisable. And, as always, keep a vigilant eye on your portfolio.
Potential Risks
The world of penny stocks is fraught with risks. Their volatility is legendary, often leading to swift and significant fluctuations in value. Moreover, these stocks often lack the comprehensive financial data that larger, more established companies offer, making them challenging to analyze. Liquidity can also be a concern. Some penny stocks experience low trading volumes, which can make selling them a challenge.
Another significant concern is the potential for fraud. The penny stock market has, at times, been associated with dubious schemes, including the infamous pump-and-dump. Investors should always exercise caution, staying wary of stocks or tips that seem too promising.
Penny Stocks To Watch
Ardelyx Inc. (NASDAQ: ARDX)
Ardelyx was discussed this week in the article “Penny Stocks To Buy Now? 3 With Ratings Up To 1,742%,” along with a few other popular penny stocks with bullish outlooks from analysts. Today ARDX stock continued grabbing attention.
Earlier this quarter, Ardelyx reported that its Tenapanor new drug application to treat hyperphosphatemia was accepted for review in China. “The NDA acceptance for tenapanor for hyperphosphatemia in China marks a significant step forward in Ardelyx’s commitment to bringing our novel therapies to patients with unmet medical needs and our desire to expand internationally alongside best-in-class partners who complement our capabilities and share our mission,” said CEO Mike Raab.
Last month Ardelyx reported its latest financial results and provided net sales revenue guidance for its IBSRELA product. The company beat earnings and sales estimates for the quarter and expects full-year 2023 net product revenue for IBSRELA to be between $72.0 and $77.0 million.
Analysts at Ladenburg Thalmann gave an update to their outlook this week. The firm maintains a Buy rating on the penny stock. It also raised its $7.50 price target to $8.50. Earlier this week, Cantor Fitzgerald upgraded Ardelyx to Overweight and raised their price target to $10.
Wheels Up Experience Inc. (NYSE: UP)
Shares of Wheels Up have been on the move in the stock market this week. A mix of earnings speculation and stock market news have helped lift UP stock; no pun intended. the company is a private aviation provider with on-demand services offered in the US. It gives access to a large fleet with membership access, charters, and aircraft management services. Wheels Up also has strategic partnerships with Delta Air Lines.
Despite posting less-than-attractive earnings results, UP stock rebounded strongly after its latest update.
Last month Wheels Up Experience inked a deal in principle with Delta Air Lines (NYSE: DAL), Certares Management, and Knighthead Capital to co-lead a $500 million facility to speed up the turnaround of Wheels Up. Funding provided by Delta, certain affiliates of Certares and Knighthead, and other partners is expected to provide the company the stability to execute on its strategic vision over the long term,” the companies said in a statement.
The RealReal Inc. (NASDAQ: REAL)
The RealReal is an online (and, in some places, physical) marketplace for authenticated luxury goods. Shares have been moving higher for the last few months, and it began when the company reported its first-quarter results. It beat estimates for earnings per share but missed sales expectations by a slight margin.
In reviewing second-quarter results, The RealReal beat EPS estimates once again and missed sales expectations by a wider margin. Revenue Guidance came in between $540 million to $560 million, with the higher end of the range above expectations of $555.26 million. Now, notable funds (not insiders) may be starting to find opportunities.
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Scion Asset Management, run by notable “Big Short” investor Michael Burry, appears bullish. In the latest round of 13F’s from institutional investors like Scion, Burry reported a stake of 1.5 million shares.
There has also been some buying by company management, including CEO John Koryl. In a buying spree at the end of August, Koryl purchased shares a prices ranging from $2.18 to $2.375. In total, his activity added up to more than 43,000 shares. It also brought his total direct holdings to more than 2.79 million shares.
4. T2 Biosystems (NASDAQ: TTOO)
The company has gained attention thanks to its portfolio of detection platforms for pathogens and specific genes. Its products include the T2Dx® Instrument, the T2Bacteria® Panel, the T2Candida® Panel, the T2Resistance® Panel, and the T2SARS-CoV-2™ Panel and are powered by the proprietary T2 Magnetic Resonance (T2MR®) technology.
Earlier this quarter, T2 received FDA breakthrough device designation for its candida auris diagnostic test. It’s the third T2 product to receive the title. The device is a direct-from-blood molecular diagnostic test to detect C. auris in 3-5 hours.
Last month, not only did T2’s latest Q2 earnings per share results beat estimates, the company also announced that it is back in compliance with NASDAQ listing standards regarding its market value. The news helped spark interest in the company and even generated some meme-stock-like buzz on platforms like Twitter and Reddit. Penny stocks can build momentum thanks to speculation and hype, which coincide with social sentiment. TTOO stock is up more than 100% since the start of August.
T2 reported second-quarter earnings recently. It beat EPS estimates by a significant margin but missed sales forecasts slightly.
“Our second quarter results were highlighted by record quarterly sepsis test panel orders and the second largest sepsis-driven instrument order in company history, demonstrating increasing demand for our life-saving direct-from-whole blood sepsis pathogen detection products,” stated John Sperzel, Chairman and CEO of T2 Biosystems. “Progressing each of our corporate priorities, the implementation of our strategic restructuring program, which has led to a reduction in operating costs and the strengthening of the balance sheet, positions T2 Biosystems to continue the exploration of strategic alternatives and execute on our product development and growth initiatives.”
