Penny stocks can come in all shapes and sizes. The typical definition involved stocks trading for less than $5, but it’s more than just assuming they’re all start-ups. If you’ve been in the stock market for the last few years, you’ve likely seen some of the most popular companies rise and fall or fall, then rise, reaching penny stock levels at one point or another.
Look at a company like Carvana (NYSE: CVNA). It wasn’t that long ago that we were discussing the company becoming a penny stock. In the article “Will Carvana Co. (CVNA) Be On Your List Of Penny Stocks In 2022?,” we talked about everything from analyst insights to speculation on Carvana’s prospects. CVNA stock ultimately reached lows of $3.55 before mounting one of the strongest rallies of any name on a list of penny stocks to watch. This week Carvana stock is back at levels nearing 52-week highs and up more than 1,330% since reaching those $3.55 lows.
Is this the case for all penny stocks? The answer is a definitive NO. But that doesn’t mean to say that there aren’t plenty of opportunities to find your own penny stock picks to capitalize on. So where should you focus? Many retail traders will look at market cap instead of stock price.
In many circumstances, there are companies that may be trading for pennies on the dollar. But, based on their share structure, they may actually be considered large-cap companies. In this article, we look at some of the cheapest small cap stocks and micro cap stocks in the stock market today.
What Are Small Cap Stocks?
First things first, what is the definition of small cap stocks, micro cap, and nano cap? In the stock market, companies are often categorized by their market capitalization (market cap). This is the total market value of a company’s outstanding shares of stock.
How is market cap calculated?
Market cap is calculated by multiplying the company’s stock price by the number of its outstanding shares. Here are the definitions of small cap stocks, micro cap, and nano cap:
- Small Cap:
- Definition of Small Cap: Small cap refers to companies with a market capitalization typically ranging from $300 million to $2 billion.
- Characteristics of Small Cap Stocks: These companies are considered to be more volatile than mid or large-cap companies. They might offer higher growth potential, but they also come with higher risks.
- Micro Cap:
- Definition of Micro Cap: Micro cap companies have a market capitalization usually between $50 million and $300 million.
- Characteristics of Micro Cap Stocks: These stocks are less liquid than larger cap stocks, and they can be more volatile. They are often newer or smaller companies and may not have a proven track record.
- Nano Cap:
- Definition of Nano Cap: Nano cap refers to companies with a market capitalization under $50 million.
- Characteristics Nano Cap Stocks: These are the smallest companies in the stock market and can be very risky investments. They are often not well-known, and information about them might be harder to find. They can be more susceptible to market manipulation due to their low liquidity.
It’s important to note that the exact thresholds for these categories can vary slightly depending on the source or financial institution. Investors should always conduct thorough research and consider their risk tolerance before investing in any company, especially those in the smaller cap categories.
Penny Stocks To Watch
- Rigetti Computing Inc. (NASDAQ: RGTI)
- Aurora Cannabis (NASDAQ: ACB)
- Performance Shipping Inc. (NASDAQ: PSHG)
Rigetti Computing Inc. (RGTI)
Market Cap: $270.97 M
Shares of Rigetti Computing stock continued climbing higher in the stock market today. The penny stock made a rebound after a sell-off late last month. One of the catalysts in play is its recent earnings.
Rigetti reported a beat on sales and EPS for the quarter. Analysts at Benchmark and Needham also reevaluated their stance on RGTI stock. Each now has a Buy rating following Benchmark’s upgrade. The firms also have RGTI stock forecast price targets of $4 and $3, respectively.
“After having launched the Ankaa-1 system internally, we are excited to have our longtime partner, Riverlane, as the first external partner using the system to work on improving error correction techniques on our new architecture,” said Dr. Subodh Kulkarni, Rigetti Chief Executive Officer. “We also look forward to making Ankaa-2, our most innovative system to date, available to the general public in Q4 of this year.”
The quantum computing company has gained interest as the sector grows in popularity. Rigetti is expecting to launch its Ankaa-1 quantum processor to customers in mid-2023. It was also awarded a US Patent titled “Parametrically activated quantum logic gates,” helping to add to the positive sentiment in the stock market. Right before the end of July, Rigetti also announced a collaboration deal with ADIA Lab to develop quantum machine learning solutions for resolving certain challenges in quantitative finance.
Aurora Cannabis (ACB)
Market Cap: $460.51 M
Aurora has been making its own news in recent weeks. Some of the latest were regarding its sale of the Aurora Sun Facility being completed via Bevo Farms’ acquisition. Bevo is one of North America’s largest suppliers of propagated vegetables and ornamental plants.
In an update, Aurora’s CEO, Miguel Martin, also mentioned, “Bevo has successfully repurposed the Aurora Sky facility in Edmonton, and we’re excited to further support their continued growth. Bevo’s acquisition of the Aurora Sun facility further demonstrates the close synergies between our companies and the value that our partnership creates for shareholders.”
The company also reported Q1 fiscal 2024 results. Aurora beat sales estimates by a wide margin, $55.91M versus $46.80M. Aurora also pointed out that there was meaningful Adjusted EBITDA growth realized. Miguel Martin noted the strong performance and explained, “We are pleased to have generated strong net revenue and record adjusted EBITDA during Q1, which positions us well for what we believe will be a successful fiscal year 2024.”
Furthermore, Aurora recently reported that it has bought back an aggregate of roughly $12.3 million (US$9.0 million ) principal amount of its senior notes. After completing these buybacks, Aurora said it will have approximately $53 million (US$39 million) of Notes outstanding.
Performance Shipping Inc. (PSHG)
Market Cap: $27.13 M
Since reaching 52-week lows of $0.68 in June, shares of Performance Shipping have slowly and steadily mounted a massive move in the market. It might not appear as such given the stock climbed from 68 cents to over $2. But that percentage change equates to more than 220% in a matter of months.
Performance Shipping specializes in the ownership of tanker vessels. It regained compliance with the NASDAQ last month and announced share buyback news. First, Performance reported that it completed a $2 million buyback. It also announced that it is beginning a new $2 million buyback plan.
“We are pleased to announce the completion of our initial share buyback program announced on April 4, 2023, which resulted in the reduction of our outstanding shares by 17.7%. We plan on further enhancing shareholder value by buying shares gradually and opportunistically with our renewed share buyback plan.”
This seems to have attracted some analysts in the meantime. Maxim initiated coverage with a Buy rating. It also has a $4 target set for its PSHG stock forecast.