With markets showing signs of strength again, I wanted to take a look at a few oversold opportunities on the market, namely oversold penny stocks. While I believe each could return multi-bagger returns, let’s be clear about a few things. One, penny stocks do present extraordinary risks. In fact, not only will I warn you about that upfront, but I’ll remind you again at the end of this article, too. Two, when it comes to penny stocks, do not risk more than you can afford to lose. That being said, here are seven oversold penny stocks to consider.
Standard Lithium (SLI)
Standard Lithium (NYSEAMERICAN:SLI) trended lower by 38% in the last 12 months. However, I believe the SLI stock is massively undervalued considering the company’s assets. A sharp reversal rally is due in the coming quarters.
To put things into perspective, the company’s South West Arkansas Project has a base case after-tax net present value of $3.1 billion. Further, the Lanxess Project has a net presence value (NPV) of $990 million. In comparison, Standard Lithium currently commands a market valuation of $612 million.
I must add that the company’s Bristol Lake asset is a 45,000+ acre project. This asset can potentially add to the lithium reserve base in the coming years. With a bullish outlook for lithium, SLI stock is poised to be a value creator. I believe that Standard Lithium would be diluting equity in the coming quarters to fund the project construction. However, that’s not a concern from a stock upside perspective considering the current valuation gap.
Bitfarms (BITF)
Bitfarms (NASDAQ:BITF) still appears attractive even after running 225% higher year to date. All thanks to a rally in Bitcoin (BTC-USD). Standard Chartered expects Bitcoin to trade at $120,000 by the end of 2024. If this estimate holds true, I expect BITF stock to skyrocket by at least five times over. Specific to Bitfarms, there are several reasons to be positive.
First, the company is fundamentally strong and expects to be debt-free by Feb. 2024. With a strong liquidity buffer, the company is positioned for aggressive expansion in mining capacity in the coming quarters. Also, assuming a scenario where Bitcoin trades near previous highs, Bitfarms will be positioned for massive margin expansion and cash flow upside.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) is my top electric vehicle (EV) penny stock. From current levels of $3.75, I believe PSNY could easily trade above $10 in the next 24 months. While the company’s delivery growth has been relatively subdued, I expect growth to accelerate next year. This is a key catalyst for PSNY stock trending higher.
In addition, I should note there are two reasons to be bullish on delivery growth for the coming year. First, Polestar 3 and Polestar 4 will be available for delivery in Q1 2024. These models will support growth next year and in 2025. Further, Polestar already has an online presence in 27 countries globally.
Also, I should add that Polestar has focused on cost-cutting and operational efficiencies. I expect EBITDA margin improvement in cost cutting coupled with operating leverage. This is another potential catalyst for PSNY stock trending higher.
Tilray Brands (TLRY)
With strong acquisitions, Tilray Brands (NASDAQ:TLRY), the company could see higher highs. In fact, one of its top priorities has been to strengthen its beverage portfolio. As noted by CEO Irwin Simon, “I am focused on acquisitions within the beverage industry, which I think is a big business,” as quoted by Reuters. He added that he also “sees Tilray’s beverage alcohol segment growing to a $300-million-plus business in the coming years.”
From a financial perspective, there are two positives. First, Tilray ended Q4 2023 with a total liquidity buffer of $450 million. This provides ample financial flexibility for organic and acquisition-driven growth. Further, Tilray expects to generate positive adjusted free cash flow from the financial year 2024. This will help in further boosting the company’s liquidity position.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is an oversold penny stock to buy and hold. KGC stock trades at a forward price-earnings ratio of 12 and offers an attractive dividend yield of 2.52%. I believe that the stock is likely to triple in the next 24 months.
I strongly believe that Kinross will be acquiring assets in the coming quarters to boost production. Last year, the company had to sell Russian assets due to geopolitical factors. With a liquidity buffer of $1.9 billion and operating cash flow visibility in excess of $1 billion, financial flexibility is high. It’s also worth noting that gold has been trading near $2,000 an ounce. I believe that a breakout on the upside is impending in 2024 with the rate hikes largely done.
SNDL (SNDL)
SNDL (NASDAQ:SNDL) is another interesting oversold penny stock. The cannabis stock has corrected by 37% in the last 12 months and seems poised for a reversal. Much like Tilray, the SNDL strategy is similar. For example, part of the company’s revenue comes from liquor and cannabis retail.
It’s worth noting that the company’s investment division has deployed $569 million in capital in credit and equity investments. Once regulatory headwinds wane and industry growth accelerates, this portfolio of investments can be a value creator. SNDL believes that its net asset value per share is currently at $3.62. Considering the current stock price of $1.70, there seems to be ample potential for upside.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) plunged by 68% in the last 12 months and looks deeply undervalued. As an overview, Solid Power is working towards the commercialization of solid-state batteries. Even if the progress is smooth, it’s unlikely that the batteries will be commercialized before 2026. However, it makes sense to buy some SLDP stock and hold with patience.
An important point to note is that Solid Power will be delivering EV cells to automotive partners in 2023 for validation testing. This is an important step towards commercialization. Further, the company has an ample cash buffer and seems fully financed for research and development activity for the next 12 to 24 months.
Another positive catalyst is the fact that the company has licensed its cell manufacturing technology to BMW (OTCMKTS:BMWYY). This will allow for parallel research and development activity and potentially accelerate commercialization.
Penny Stocks
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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.
