Penny stocks refer to shares of small or micro-cap companies that trade for less than $5 per share. What cheap stocks lack in size and stability, they can potentially make up for in rapid price changes and explosive short-term gains. For risk-tolerant investors, a thoroughly researched penny stock selection could deliver outsized returns. However, the emphasis here is on thorough research as low-priced stocks also come with an amplified risk of losses.
Are Penny Stocks Worth It?
So what exactly is the attraction of penny stocks for some investors? In short – their sheer speculation. While most penny stocks fail, the select few that succeed can produce tremendous growth at light speed. While these success stories are exceedingly rare, the chance of hitting one resonates with investors.
However, for every double, triple, and even 10X gainer, dozens of penny stocks fizzle out or continue languishing under $5 per share indefinitely. Without proper due diligence, penny stock investing is no better than betting at casinos. Understanding the risks here cannot be overstated.
So what indicators could one look for in up-and-coming penny stocks with growth potential? Warning signs to avoid? And where can one look to find such stocks?
Penny Stocks: Weighing Risk & Reward
In terms of warning flags, opaque or inconsistent financial reporting, annual net losses without clear paths to profitability, frequent and dilutive share offerings, regulatory run-ins and inactive trading volumes should all give investors pause in considering a penny stock.
On the other hand, one could look for penny stocks with glimpses of commercial success, newly upgraded financial guidance, rising revenues and volume trends, accumulated trading interest through message boards and social media, and clear potential catalysts that could continue driving growth.
Having covered some basics around penny stocks, their inherent risks, and what to potentially look for in ones worth watching, this article will highlight five current penny stocks to watch that are on the radar right now. Each stock trades for under $5 per share and has recent developments that lend themselves to growing speculation.
Penny Stocks To Watch
- Marpai, Inc. (NASDAQ: MRAI)
- Tempest Therapeutics, Inc. (NASDAQ: TPST)
- Signing Day Sports, Inc. (NYSEAMERICAN: SGN)
- PaxMedica, Inc. (NASDAQ: PXMD)
- Heart Test Laboratories, Inc. (NASDAQ: HSCS)
Marpai, Inc. (MRAI)
Marpai, Inc. is a national Third-Party Administrator (TPA) company. They focus on providing health plan services to employers with self-funded health plans. The company reported its financial results for the third quarter of 2023.
Total revenue was $8.7 million, a 77% increase from the same period in 2022, primarily from the acquisition of Maestro Health. This acquisition and organic sales also led to a 126% increase in the number of customer employees. However, the company experienced an operating loss of $7.0 million and a net loss of $7.3 million. The net loss per share was $0.98, slightly better than the previous year’s $1.14 per share.
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Marpai’s CEO expressed confidence in the company’s momentum toward profitability and mentioned upcoming rapid changes to be discussed in an investor presentation. Marpai has withdrawn its Form S-1 Registration Statement due to adverse market conditions and is re-evaluating its financing options.
Director Yaron Eitan and CEO Damien Lamendola have also begun adding to their existing MRAI stock positions. Eitan picked up 100,000 at an average of roughly $1.23 and Lamendola nabbed 200,000 at an average of roughly $1.19.
Tempest Therapeutics, Inc. (TPST)
Tempest is a clinical-stage oncology company. They focus on developing first-in-class therapeutics that target both tumor-focused and immune-mediated mechanisms. Like many others this month, Tempest reported their third-quarter 2023 financial results and provided a corporate update.
Key highlights include the progression of TPST-1120, a clinical PPARα antagonist showing superiority in a first-line hepatocellular carcinoma study. TPST-1120 demonstrated increased response rates and favorable safety data. The company also adopted a stockholder rights plan to protect long-term investment value.
Looking ahead, Tempest plans to advance TPST-1120 into a registrational study, continue developing TPST-1495 for endometrial cancer, and progress TREX1 inhibitors. Financially, the company reported $32.8 million in cash and equivalents, extending their cash runway into 2025. Their net loss was $6.8 million for the quarter, an improvement over the previous year’s $8.9 million.
What is the market looking at for TPST next? On November 28th the company presents at the Piper Sandler Healthcare Conference.
Signing Day Sports, Inc. (SGN)
Signing Day Sports, Inc. is a newly minted IPO that made its debut earlier this month. It develops the Signing Day Sports app, which serves high school athletes in the college recruitment process. While there haven’t been many new updates from the company considering the recent IPO, momentum has begun coming into the penny stock.
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The company’s app helps student-athletes in creating recruitment profiles, which are essential for college coaches’ evaluations. The app covers multiple sports and is adaptable to various partner needs. Signing Day plans to use IPO proceeds for digital marketing, aiming to enhance student-athlete profiles and increase user revenue. Additionally, they are leveraging communication platforms to educate student-athletes on personal development and NIL opportunities.
Despite stockholder support, the company is investigating the recent decline in its stock price, suspecting illegal short selling. They aim to establish themselves as the premier recruiting technology platform for student-athletes globally. While shares initially dipped post-IPO, SGN stock has bounced over the last two sessions and some are following its developments more closely.
PaxMedica, Inc. (PXMD)
PaxMedica, Inc. is a clinical-stage biopharmaceutical company. They develop treatments for neurological disorders like Autism Spectrum Disorder (ASD). PaxMedica has published the results of a Phase 2 study on ASD in the Annals of General Psychiatry. The study assessed the efficacy and safety of low-dose suramin infusions in 52 boys with moderate to severe ASD.
The 10 mg/kg suramin arm showed significant improvements in core symptoms on the CGI-I scale compared to placebo. These findings suggest suramin could be a potential ASD treatment.
This month many have viewed the successful study as a sign of potential marketable treatments, boosting stock value. It doesn’t come without risks. These include developmental delays, funding issues, and IP challenges. Results are positive but not guaranteed to lead to successful products.
Proponents will likely highlight the study’s success, seeing suramin’s potential as a major breakthrough in ASD treatment. Skeptics may stress the hurdles ahead, like further testing, regulatory approval, and market competition. A prudent stance acknowledges the study’s promise. It would also recognize the lengthy process of commercialization and risks.
Heart Test Laboratories, Inc. (HSCS)
HeartSciences, known formally as Heart Test Laboratories, Inc., is a medical technology company utilizing artificial intelligence (AI) to enhance electrocardiograms (ECGs/EKGs) for better heart disease detection.
Attention has been sparked after recent milestones were announced this week. The company completed licensing agreements with the Icahn School of Medicine at Mount Sinai. These agreements allow HeartSciences to develop and commercialize AI-based electrocardiographic algorithms and assets. The technology focuses on improving the detection of cardiovascular diseases through advanced ECG analysis.
The company plans to integrate these AI algorithms into a cloud-based platform compatible with various ECG devices globally, including their MyoVista device. This development aligns with HeartSciences’ commitment to making ECGs more clinically valuable, especially in frontline healthcare settings.
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While 2023 hasn’t been a banner year for the stock, after putting in fresh 52-week lows, HSCS stock has been in rally mode. The last few weeks have seen share prices nearly double. Since it’s still one of the penny stocks under $1, it’s in its own class of speculative trends.
