Penny stocks are the shares of micro- and small-cap companies that lure investors with the promise of higher gains than the market average, however, they come at a similarly high risk.?
They often lack liquidity, which amplifies price swings and makes it harder to exit a position when the time comes. These stocks offer a fertile ground for market manipulators, too, so investors must do their due diligence before buying them.
In this guide, we analyze the 10 best penny stocks to buy in 2024. Our list follows the Securities and Exchange Commission’s definition of penny stocks, featuring companies each priced under $5 per share. Remember, though, that penny stocks can be extremely volatile and carry significant risks.
Let’s start with a quick overview of the 10 best penny stocks to buy today:Best Penny Stocks to Buy in 2024
A Closer Look at the Top Penny Stocks to Invest in
Below, we take a more detailed look at the top penny stocks to buy today:
1. SoundHound – Nvidia Buys Stake in AI Voice Recognition Player
SoundHound AI, worth just over $1 billion, is one of the best penny stocks that would give you exposure to the artificial intelligence (AI) space. Its AI voice recognition technology helps machines understand human speech. It drew a lot of attention when it received an investment from Nvidia, the largest chipmaker, sending its shares spiking 67% on the news.
Nvidia bought more than 1.7 million shares in SoundHound AI and gave no further information. The stake is worth about $6.8 million at current market prices.
The company is also developing conversational intelligence, which understands speech prompts and gives a voice response, which can be used by restaurants for taking orders and carmakers for dashboard assistants.
The stock has witnessed a lot of volatility since its 2022 IPO and it’s still trading 60% below its IPO price. While it remains unprofitable, the current interest in AI technology is driving sales, with management forecasting a roughly 50% increase in full-year 2023 sales to between $43 million and $50 million.
2. Nordic American Tankers – Geopolitics Lifts Demand for Its Tankers
The Bermuda-based shipping company, which owns and operates oil tankers around the world, is currently valued at $858 million, and Wall Street analysts are expecting its share price to rise to $5.50 in the next 12 months, giving it a 34% upside.?
The shipping company that operates a fleet made up exclusively of Suezmax crude tankers, the largest ships that can transit the Suez Canal, said that geopolitical tensions around the world increases demand for its ships.?
In the first nine months of 2023 it posted net voyage revenue of $202.93 million, compared with $97.73 million a year earlier. Net income was $81.2 million in the nine-month period, compared with a net loss of $20.9 million a year earlier.
The stock benefits from a price-to-earnings ratio of 7.3 times, compared with 25 times for the U.S. marine shipping industry. It has a strong balance sheet, with debt of $9 million per ship, one of the lowest among publicly traded tanker operators. It has paid a dividend in each quarter since 1997.
3. Bitfarms – Crypto Mining Stock With High Revenue Growth Potential
The Canadian company, which mines cryptocurrency coins and tokens in server farms located in Canada, the U.S., Paraguay, and Argentina, validates? transactions on the Bitcoin Blockchain, earning cryptocurrency from block rewards and transaction fees.
Listed on the Toronto Stock Exchange and the Nasdaq Global Market, the company is among the larger penny stocks with market value of CAD 1.44 billion ($1.07 billion).?
According to a recent investor presentation, the company predicts a 223% increase in its hashrate, the total computational power it uses to mine and process transactions, by the second half of 2024 from end-2023, increasing its revenue generating potential as it upgrades its farms.?
In its most recent quarter, it made revenue of $35 million compared with $33.2 million a year earlier, with its net loss narrowing to $18.7 million from $89.53 million. Even so, it has a high revenue growth potential. Wall Street analysts forecast that its revenue will increase 86% to $266.27 million in 2024 from 2023.
4. Creative Realities – Signage Designer Trading at Attractive Multiples
Creative Realities, which has a market cap of $38.6 million, designs and applies digital technologies for retail environments to improve the customer experience and engagement, also helping its clients monetize digital networks.?
The Louisville, Kentucky-based company posted a 3.5% increase in revenue in the third quarter to a record $11.6 million, driven by new corporate customers for its fully integrated digital signage offerings from hardware to Software as Service and related services.??
The signage designer expects fourth quarter revenue of $15.8 million to $17.8 million and record sales of $46.4 million to $48.4 million for 2023. It forecasts further growth in revenue to $60.0 million to $80 million for 2024.?
The shares have risen 67% over the past year and its price-to-earnings ratio of just 9.63 may signal that they are undervalued.
5. Rolls-Royce – Top-Performing Penny Stock for Portfolio Stability
Many penny stocks are small cap startups with little track record. Rolls-Royce’s roots, though, reach back to a carmaker formed in 1904. With the Rolls Royce luxury cars now being made by BMW, Rolls-Royce today is the world’s second largest aircraft engine manufacturer with a market cap of ￡27.5 billion ($37.7 billion). Owning it could increase the stability of your portfolio.
Rolls-Royce engines power more than 35 types of commercial aircraft, and it’s also a major engine maker for the military transport market and the second largest provider of defense aero-engine products and services globally. It makes safety mechanisms for the air, land, and sea, as well.
Currently priced at just 326 British pence ($4.16) the stock trades on the London Stock Exchange, and has gained 197% over the past year. The gains have been driven by the company lifting its earnings predictions. In December, Rolls-Royce said it sees underlying operating profit increasing to ￡2.5 billion to ￡2.8 billion in the medium term from ￡0.5 billion in 2022. Analysts on average expect the price to rise to 379.30 pence in 12 months.
6. So-Young International – Social Network for Medical Aesthetic Services
The Nasdaq-listed small-cap company valued at $113 million operates an online platform for medical aesthetic services and information, including media content, a social community, and an online reservation system with customer reviews in China and internationally. It’s riding two trends, social networking and the desire to remain youthful.
It saw revenue growth of 17% over the past three years, with sales climbing 19.2% to RMB 385.3 million ($52.8 million) in the third quarter. For the full year 2023, four Wall Street analysts on average expect it to post revenue of $208.22 million, and a further increase this year to $234.67 million.
Its balance sheet is impeccable, with total assets of $429.33 covering total liabilities of $80.99 million as of Sept. 30.
With its profit expected to double in the next few years, investors may be buying into a prudently managed business with great revenue and share price growth potential. Analysts expect its share price at $2.78 in 12 months, an upside of more than 140%.
7. LuxUrban Hotels – Rapid Revenue Growth, Prudent Financials
The hotel operator uses a long-term lease, asset-light business model to acquire and manage a growing portfolio of short-term rental properties in major metropolitan cities in the U.S., including Miami, Washington D.C. and New York City.
LuxUrban, which has a market value of $106.46 million, is in a rapid phase of revenue growth. Net rental revenue rose 105% in 2022 to $43.8 million. The company sees revenue of between $120 million and $125 million for 2023, and further increase to between $265 million to $270 million this year.
LuxUrban is also on the cusp of turning profitable. Wall Street analysts predict that it will post its first full year profit in 2024 from an expected loss in 2023.
The company maintains a strong balance sheet by trimming debt and building cash. Total debt declined to $5.2 million by Sept. 30 from $14 million at end-2022, with cash and cash equivalents growing to $4.8 million from $1.1 million in the same period.
8. Bionano Genomics – DNA Mapping Stock With Long-Term Potential
Bionano Genomics is a U.S.-based biotech company, which has developed an optical genome mapping technology that detects gene variations with unprecedented precision, helping in the diagnosis and treatment of diseases such as Alzheimer’s Disease and cancer.
Listed on the Nasdaq, the micro-cap penny stock is currently valued at just $45 million. Like many penny stocks, Bionano Genomics has been volatile, trading in a range of between $1.04 and $14.50 in the past year. However, based on an average analyst price target of $9, it has a more than 600% upside potential in the next 12 months.
According to preliminary results, the company expects full year 2023 revenue to be in the range of $35.8 million and $36.1 million, an increase of 29% to 30% compared with 2022. Bionano installed 326 optical genome mapping instruments by year-end, up 36% from a year earlier. While the company is not profitable yet, it says its target market includes 10,000 labs and 1,400 therapeutics companies, representing a total potential market opportunity of up to $10 billion annually.
9. Acurx – Robust Balance Sheet Covering Debt Levels Twice Over
Acurx is a biopharma company that develops new antibiotic treatments for difficult-to-treat bacterial infections. Listed on the Nasdaq, it has a small market capitalization of just $41 million, and its shares have gained more than 70% in the past six months.
The pharma firm said in October it decided to progress its antibiotic candidate ibezapolstat to treat patients with Clostridioides difficile infection (CDI) to Phase 3 trials more quickly based on encouraging results.
As a clinical stage firm, Acurx is still unprofitable. It posted a net loss of $3.1 million, or $0.24 per share, in the third quarter, compared with a net loss of $3.5 million or $0.32 per share a year earlier. It had cash totaling $7.1 million at the end of the quarter, compared with total liabilities of $3.2 million.
10. Torrid – U.S.-Based Women’s Clothing Stock With Attractive P/S Ratio
Listed on the NYSE 2021, and still in its growth stage, Torrid is a U.S.-based retailer of plus-size women’s clothes and accessories, with more than 600 stores across 35 U.S. states.
While it has been volatile, its share price has gained more than 50% in the past year. In terms of valuation, it has a market cap of $436 million, and a P/E ratio of 36.65, which is above the industry average of 24.16. However, it has an attractive price to sales ratio of 0.36, better than the industry average of 2.19.
Looking at its third quarter earnings, Torrid beat Wall Street analysts’ revenue and earnings estimates. Revenue still dropped 8.3% to $275.4 million, and the company posted a loss per share of $0.03, topping analysts estimates of $0.05 loss per share. For the full year Torrid raised its net sales estimate to between $1.125 billion and $1.140 billion, beating analyst forecasts.
The methodology we followed when selecting the best penny stocks to buy is outlined below.Our Methodology When Rating the Best Penny Stocks
Why Invest in Penny Stocks?
Now that we’ve explained how penny stocks function, let’s explore why this marketplace is worth considering.
Potential for Significant Returns
In a nutshell, penny stocks are popular for their high-growth potential. Investors add penny stocks to their portfolio to target much higher gains than the broader market.
The reason that penny stocks can increase in value so quickly is that they are usually micro-cap companies, valued at between $50 million and $300 million. This means that even a small amount of buying pressure can result in the stock increasing significantly.
However, investors must be cautious. What goes up can just as quickly come crashing down. For example, while a stock can increase by 100-200% in one day, it can also lose the majority of its value over the same period.
Invest in Growth Companies From the Ground Up
Penny stocks aren’t just suitable for short-term traders looking for a quick entry and exit. On the contrary, some of the best penny stocks to buy are long-term investments.
Some growth companies will initially list on OTC markets. They don’t meet the requirements for primary exchanges like the NYSE or Nasdaq. This might be because they don’t have a large enough valuation or the company doesn’t have enough stockholder equity to meet listing conditions. Either way, OTC exchanges can be a great way to find up-and-coming penny stocks before they explode.
- For instance, consider a new EV company with a small market capitalization of just $10 million.
- As the company increases production levels and sales, it will naturally see its valuation rise.
- Several years down the line, the EV company could meet the?requirements of a NYSE listing.
- And if it does, it will be worth significantly more than the $10 million valuation you initially secured.
This way, investors in penny stocks might just find the next Tesla or Apple.
Some investors are attracted to penny stocks because of the low share price available. As per the SEC’s definition, penny stocks trade for under $5. This means that you can buy a large number of shares without needing to invest significant amounts.
A $1,000 investment will get you about 320 Acurx Pharma shares, but just 5 shares in Tesla.
Ideal ?for Diversification Strategies
Choosing the best penny stocks to invest in is no easy feat. After all, on the OTC Markets Group exchange alone, more than 12,000 penny stocks are listed. There are thousands more when you factor in the NYSE, Nasdaq and international exchanges.
On the flip side, having access to so many penny stocks makes diversification simple. This ensures that you’re not overexposed to a small number of companies.
- For example, a good starting point is to short-list industries that you’re interested in.
- You might consider anything from electric vehicles and energy to biometrics, pharmaceuticals, and cybersecurity.
- You can then purchase a broad range of penny stocks from these industries.
- If a particular industry is performing well, at least one of your penny stock investments has the potential to grow.
For example, cybersecurity and defense companies are seeing growth right now, considering the increased tensions between Israel and Hamas. Similarly, AI startups are getting snapped up, thanks to the biggest trend in technology.
Where to Get Penny Stock Tips and Insights
To learn more about how to pick penny stocks, we recommend checking out AltIndex, a subscription service that uses artificial intelligence (AI) and alternative data.?
This means that it analyzes social media and other websites, app downloads, customer satisfaction ratings, and other data regarding a company.
The data AltIndex gathers over time is then compared to other companies while using machine learning to come up with investment insights. Stocks are given a score from of 1 to 100, simplifying the analytical process for investors.
With more than 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.
You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well many other useful features.
Conclusion
Penny stocks are a risky asset class that can produce rapid gains or losses in a short period of time. Plenty of research is required when building a penny stock portfolio – so make sure you consider the risks before proceeding.
To help, you can use AltIndex, which provides a wide variety of tools and resources for stock investors.
References
- https://www.fda.gov/drugs/development-approval-process-drugs/drug-approvals-and-databases
- https://www.nasdaq.com/market-activity/stocks/bngo
- basics/glossary/microcap-stock
- https://www.investor.gov/introduction-investing/investing-basics/glossary/over-counter-otc-securities
- https://www.otcmarkets.com/
- https://www.spglobal.com/spdji/en/indices/equity/sp-500/
- https://www.nyse.com/listings-process
- https://www.wsj.com/market-data/quotes/TSLA
- https://www.ema.europa.eu/en
- https://www.sipc.org/for-investors/what-sipc-protects
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Kane Pepi
EditorKane Pepi is an accomplished financial and cryptocurrency writer who has an extensive portfolio of over 2,000 articles, guides, and market insights. With his expertise in specialized subjects such as asset valuation and analysis, portfolio management, and financial crime prevention, Kane has built a reputation for providing clear explanations of complex financial topics. He holds a Bachelor's Degree in Finance and a Master's Degree in Financial Crime, and is currently pursuing his Doctorate degree, which focuses on investigating the complexities of money laundering in the cryptocurrency and blockchain technology sectors. Kane's wealth of knowledge and experience in the field make…
