The penny stock sector, characterized by its volatility, often undergoes rapid surges and declines due to factors like low volume, cheap pricing, and operational dynamics. Still, for well-informed investors, certain penny stocks present opportunities to achieve substantial gains at low costs. This backdrop forms my list of penny stocks to buy now.
Recent trends indicate a high probability of consecutive rate cuts in 2024, and lower rates tend to kickstart boom cycles for penny stocks. With rates projected to stay around the low 5% range for the rest of 2024 before dropping to the high 4s next year, compared to the current rate of 5.5%, even modest improvements could send penny stock segments surging.
So here are seven penny stocks to buy now.
Destination XL Group (DXLG)
Destination XL Group (NASDAQ:DXLG) is unique among penny stocks because, unlike so many unprofitable or speculative firms, Destination XL Group is a longstanding retailer with a proven business model and operational success. The company, which sells “big and tall” men’s clothing, saw sales slump slightly throughout 2023 – but not enough to justify current valuation levels.
A few weeks ago, Destination XL posted fourth-quarter and end-of-year results that saw the company’s adjusted earnings hit $0.10 per share for the quarter and $.50 for the year. While respectable, considering 2023’s retail shopping fluctuations, it also marked a 16% and 20% drop from the prior period, respectively. Still, the company’s 10.7% EBITDA margin is nothing to sneeze at – though Wall Street seemingly thought otherwise, as shares dipped about 10% after the report.
That represents a slim 6x price-to-earnings ratio and, better yet, a share price of just 0.42x sales. Likewise, the company’s quality cash management (it carries no debt) lets management keep buybacks high. Destination XL’s total yield is 12.52% – in other words, all things considered, this makes it one of those penny stocks to buy now.
Connexa Sports Technologies (CXNA)
Connexa Sports Technologies (NASDAQ:CNXA) is a unique penny stock capitalizing on emerging sports trends. More specifically, the company’s proprietary Slinger Bag targets unique intersections of sports popularity and region-specific trends by selling custom equipment for pickleball (increasingly popular in the US), padel (a Mexican racket sport), and perennially popular tennis. These niche verticals are unique enough to target directly through quality ad campaigning but popular and widespread enough to ensure product longevity and market growth. This sets Connexa up as a serious growth penny stock to capture renewed outdoor sports enthusiasm as we move into the spring and summer months.
Connexa came under fire from short sellers throughout 2023, pushing per-share pricing down more than 70% and forcing a reverse stock split. Despite this, new strategic investors stepped up to the pitch to save Connexa Sports Technologies – and shares of the stock surged more than 500% in the past month in reaction. In other words, there’s a lot of momentum behind this penny stock’s prospects.
The Metals Company (TMC)
I looked at The Metals Company (NASDAQ:TMC) briefly last week, primarily from the perspective that recent Congressional legislation could be a boon to the deep-sea metals mining company. But renewed institutional interest in sourcing valuable metals and minerals (necessary for pretty much all of today’s tech) from the ocean isn’t the only thing keeping this penny stock afloat.
The company recently brought a new board member, Steve Jurvetson, to the team as Vice Chairman and “special advisor” to the CEO. Jurvetson’s background includes early investments or board positions with SpaceX, Tesla (NASDAQ:TSLA), Planet Labs (NYSE:PL), and more. While I’m averse to hinging company hopes on a solo savior, Jurvetson’s background in helping develop small, speculative, untested companies’ full potential could be game-changing for the deep sea mining penny stock.
One of the company’s current sticking points is its cash position—sea mining exploration is a costly endeavor that takes time to bear fruit (if it does at all). The Metals Company has enough cash and credit liquidity to last another year or so at current spending levels. Still, look for imminent strategic investment developments on the horizon, as I think a major benefit to Juvetson’s board appointment will include his Silicon Valley connections to ready capital and deep pockets.
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT) remains somewhat of a dark horse among penny stocks. The company (and shareholders) endured significant hardships in 2023, with ongoing bearish sentiment keeping its shares low. Critics highlight issues such as decelerating installation rates, liquidity concerns, and challenges competing with Tesla’s expansive charging network—each a valid criticism. But shifting economic winds, including interest rate cut expectations, could prove to be what the penny stock needs to secure a rebound.
ChargePoint CEO Rick Wilmer has characterized the recent quarters as a “wait and see” period rather than a full-blown operational decline. Looking ahead to 2024, he commented, “It’s getting better, as we’re getting more and more data around the economy, and it appears we’re heading for a soft landing.”
Competing in electrical charger installation, especially against a behemoth like Tesla that offsets costs through car sales, is an expensive venture. Still, renewed EV sales and possible rate cuts could open up new liquidity opportunities for ChargePoint and kickstart the company’s expansion. This makes it one of those penny stocks to buy now.
Desktop Metal (DM)
Desktop Metal Inc (NYSE:DM) is on a run recently as the 3D-printing stock popped more than 30% since January 1st. Though trading well below past highs, the penny stock is set to expand its horizons beyond the basics by targeting new audience segments with rich growth potential.
Recently, Desktop Metal’s healthcare-focused subsidiary, Desktop Health, launched an extensive initiative named ScanUp, targeting dental professionals to transition their practices into the digital age. Given that “half of the dentists in the United States have not yet adopted intraoral scanning,” this foundational step towards dental digitization opens a large, untapped market for Desktop Metal. The ScanUp platform, requiring an initial 36-month commitment, promises to generate more predictable, recurring revenue.
Ending 2023, Desktop Metals significantly reduced its net loss to $323.4 million from $740.3 million in 2022. While it is still progressing toward profitability, Desktop Metal remains a high-risk but potentially high-reward investment opportunity as a penny stock within the growing 3D-printing sector.
Rumble (RUM)
Rumble (NASDAQ:RUM) shares have soared nearly 50% since January 1st, setting it apart as a high-momentum penny stock in a relatively stagnant social media sector. The surge in shares comes partly from the company’s provisional offer to acquire TikTok. Still, Rumble’s standing as a top video-centric social media stock isn’t solely dependent on the success of this acquisition. Demonstrating an acute understanding of user preferences, Rumble has partnered with Barstool Sports to provide “access to all Barstool Sports content…including live streams.”
Historically catering to right-of-center users, Rumble’s attempt to buy TikTok and its partnership with Barstool Sports indicate a strategic push to attract a broader audience. This move seems to be paying off. The company’s end-of-year report highlights include revenue more than doubling since 2022 to $81 million and a 16% pop in monthly active users – the relative disparity means that advertisers see Rumble’s core constituency as worth targeting, and sales should spike further as Rumble’s attempt to spread its wings bears out.
iRobot (IRBT)
Although its per-share price of about $8 appears to exclude it from penny stock status, iRobot (NASDAQ:IRBT) has a market cap of $229 million, smaller than several stocks on our list, including Desktop Metal and The Metals Company. Despite its small size, iRobot is poised as a possible comeback story of the year. Should circumstances shift in its favor, it could generate unstoppable momentum for this robotics stock, regardless of broader market conditions.
The failed acquisition Amazon (NASDAQ:AMZN) acquisition’s value thesis centered around iRobot’s robust patent and intellectual property portfolio. Despite a recent slowdown in robotic vacuum sales, its advanced technology continues to attract potential acquirers and investors. With the robotics sector experiencing a renaissance, iRobot stands as one of the few household names well-positioned to capture significant attention from both institutional and retail investors as this trend unfolds.
Even without relying on merger and acquisition prospects, iRobot’s future isn’t bleak. Although sales are currently sluggish, the company is actively right-sizing its operations, aligning with the “survive or die” theme prevalent among small-cap stocks. It recently achieved a 26% improvement in per-share earnings. Despite this boost, iRobot’s stock trades at just 0.37x sales, presenting it as a unique value opportunity with substantial growth potential.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.