On a relative basis, the interest in penny stocks has declined as compared to the euphoria of 2021. In challenging market conditions, investors are focused on blue-chip stocks and high-quality growth stocks. However, there also some undervalued penny stocks to buy for perceptive investors.
However, several penny stocks have already been silent killers in 2023. As an example, Riot Platforms (NASDAQ:RIOT) has skyrocketed by 201% for year-to-date 2023. There are several other missed opportunities. Fortunately, there are several undervalued penny stocks to buy that are likely to surge in the coming quarters.
As always, I remain focused on non-speculative penny stocks. These stocks represent companies with business fundamentals that are worth talking about. These are the penny stocks with huge upside potential on the back of business catalysts. I believe that it’s not a good time to invest in purely speculative meme stocks.
Let’s discuss the reasons to be bullish on these undervalued penny stocks.
Cronos Group (CRON)
Cronos (NASDAQ:CRON) stock is massively undervalued and a strong rally is imminent. Currently, Cronos commands a market valuation of $653 million. In comparison, the company reported cash and short-term investments of $836 million as of Q1 2023. This puts into perspective the impending upside potential.
However, this is not the only reason to be bullish on Cronos. The cannabis company expects to deliver positive cash flows in 2024. This seems likely with the company pursuing cost cutting and streamlining of operating structure. If the company can achieve the cash flow guidance, the stock is likely to surge.
I believe that Cronos exiting the U.S. hemp business is not a concern. If regulatory headwinds wane, the company can make an aggressive entry considering the financial flexibility. I also see the company’s presence in the recreational as well as wellness segment as a key positive. The addressable market is significant in U.S. and Europe.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) stock has trended higher by 13% for the year. However, the best part of the rally is impending for this gold miner. KGC stock looks undervalued at a forward price-earnings ratio of 13.6. The stock also offers an attractive dividend yield of 2.47%.
From a business perspective, there are two important points to note. First, Kinross reported a liquidity buffer of $1.7 billion as of Q1 2023. The company also reported operating cash flow of $259 million for the quarter. With high financial flexibility, the company is likely to pursue acquisition driven growth. Last year, Kinross sold Russian assets due to geopolitical reasons. An opportunistic acquisition will make-up for the decline in reserves and production visibility.
At the same time, Kinross has guided for stable gold production through 2025. Even if there is no acquisition, the company is positioned to deliver annual OCF of around $1 billion with gold at $2,000 an ounce. This will provide Kinross will the flexibility for robust dividend growth.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) stock is an undervalued penny stock to buy from the EV space. It’s worth noting that PSNY stock has declined by 30% for year-to-date 2023. However, in the last one month, the stock has trended higher by 14%. This is an early indication of the point that the stock has bottomed out.
The reason for Polestar correcting further in 2023 is the company’s conservative guidance and product delay. However, these factors are discounted in the stock and I see the following positive catalysts.
First, the company has intensified cost cutting measures. I expect EBITDA losses to narrow in the coming quarters. That’s likely to boost the stock price.
Further, with delays, Polestar 3 and Polestar 4 launch is likely in the first quarter of 2024. If macroeconomic conditions improve on a relative basis, the company will be positioned for strong deliveries growth in the coming year. Operating leverage will ensure that margin improvement sustains.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
