Value penny stocks have been associated with blockbuster returns in bull markets. Back in 2021, many penny stocks doubled or tripled in a matter of weeks.
Of course, we are not in a similar bull market that’s characterized by euphoria among investors. However, several value penny stocks can deliver 5x or 10x returns in the next five years. This is a conservative estimate, and returns can be higher if a few impending catalysts for the business play out.
In making the above point, it’s also clear that I am not discussing purely speculative penny stocks. My idea is to look at promising businesses at an early growth stage. There are likely to be headwinds, but if progress remains steady, a lot of value creation is expected in the long term. Let’s, therefore, discuss the reasons to be bullish on these value penny stocks.
Value Penny Stocks: Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) looks massively undervalued among cannabis penny stocks. I would expect CRON stock to deliver multibagger returns from current levels of $1.95. Besides being oversold, Cronos has reported positive business developments that will support a rally from current levels.
I must mention at the onset that Cronos has a cash buffer of $840 million. The cash buffer is higher than the current market valuation of Cronos. This can be utilized for aggressive organic and acquisition-driven growth in a federal-level cannabis legalization scenario.
For Q3 2023, Cronos reported revenue growth of 22% on a year-on-year basis to $24.8 million. Adjusted EBITDA losses also narrowed as compared to Q3 2022. With cost-cutting measures, Cronos has guided for positive net change in cash for 2024. This is an important catalyst for CRON stock trending higher.
It’s noteworthy that Cronos launched the Peace Naturals brand in Germany. Further, the Company has a presence in Israel. As Cronos expands beyond Canada, growth is likely to accelerate further.
Standard Lithium (SLI)
Standard Lithium (NYSE:SLI) stock is a potential 10x in the next five years if business developments remain positive. The early-stage miner has been depressed as lithium metal prices have corrected during the year. However, lithium’s long-term outlook remains positive, and SLI stock will likely create immense value.
In October, the Company announced the highest confirmed lithium-grade brine in East Texas. It’s also worth noting that the Company commands a market valuation of $490 million. I must add that the net present value of the South West Arkansas project is $4.5 billion. If the NPV of other assets is also considered, SLI stock should be 10x from current levels based on asset valuation.
However, the markets will focus on the commercialization timeline. If the project progress is steady, it will translate into meaningful stock upside. I expect Standard Lithium to dilute equity, but that’s not a concern considering the cash flow potential from the assets.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) stock is an undervalued gold miner that trades marginally above $5. I am tempted to talk about KGC stock, considering a forward price-earnings ratio of 13.3. Further, the penny stock offers a dividend yield of 2.26%.
First, it’s important to understand that gold has been in a period of extended consolidation at around $2,000 an ounce. I am bullish on the precious metal with geopolitical tensions and the expectations of rate cuts in 2024. If gold surges by 15% to 20% from current levels, KGC stock will double.
From a fundamental perspective, Kinross has a robust liquidity buffer of $2 billion as of Q3 2023. Further, Kinross reported an operating cash flow of $406.8 million for the quarter. If gold trends higher next year, OCF visibility will be more than $2 billion.
Robust flexibility positions Kinross to pursue aggressive organic and acquisition-driven growth. The stock will likely surge if production growth visibility accelerates for 2025 and beyond.
Plug Power (PLUG)
I didn’t expect Plug Power (NASDAQ:PLUG) to be listed among penny stocks. PLUG stock seems oversold after plunging by 75% in the last 12 months. It’s worth noting that the stock has a short interest of 26.5%, and I expect a massive short-squeeze rally.
It’s important to note that Plug Power has ambitious growth plans. From current year revenue of $1.2 billion, the Company expects to boost revenue to $20 billion by 2030. It’s therefore surprising to see the stock plummet.
I believe that there are two reasons for this deep correction. First, financing growth is a concern. If the Company can boost its liquidity buffer, the stock outlook will change. Further, there is a gap between planning and execution. The markets will wait to see the execution capabilities. Additionally, cash burn is a concern and requires an infusion of funds.
Therefore, there is no doubt that the risk is high, but I would consider some exposure. The hydrogen economy has growth tailwinds, and if Plug Power can deliver on its plans, returns will be multibagger.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) is another value penny stock to buy after a correction of 70% in the last 12 months. A simple investment thesis for SLDP stock would be the commercialization of solid-state batteries. If the Company is successful by 2026 or 2027, SLDP stock can deliver 20x or 30x returns from current levels. It’s, therefore, a risk worth taking.
I am encouraged by the fact that the Company has the backing of big automotive players like Ford (NYSE:F) and BMW (OTCMKTS:BMWYY). In a major development, the Company has made its first A-1 EV cell deliveries to BMW to formally enter automotive qualification. Positive results from validation testing can be a game changer.
It’s worth mentioning that in December 2022, the Company licensed its cell design and technology to BMW for parallel research and development. This will help in accelerating the path towards commercialization.
As of Q3 2023, Solid Power reported a cash buffer of $443 million. This will ensure that no dilution is needed in the next 12 to 18 months.
Bitfarms (BITF)
Bitfarms (NASDAQ:BITF) stock has surged by 200% year-to-date. The stock, however, remains undervalued at current levels of $1.3. If Bitcoin (BTC-USD) continues to trend higher, BITF stock can deliver multibagger returns in the next few quarters.
Bitfarms is a Bitcoin miner, and the micro-cap stock has a robust liquidity buffer of $65.8 million as of Q3 2023. The Company also expects to be debt-free by February 2024. Therefore, with high financial flexibility, Bitfarms is positioned to pursue aggressive growth.
For Q3 2023, Bitfarms reported revenue and EBITDA of $35 million and $7 million, respectively. The Company is a low-cost Bitcoin miner, and the EBITDA margin can be significantly higher than 20% in the coming quarters. As cash flows swell, the stock is likely to be revalued.
I must add that as of March 2022, the Company’s mining capacity was 2.7EH/s. Bitfarms targets to expand capacity to 7EH/s by March 2024. This will translate into healthy growth and the addition of digital assets to the balance sheet.
Blink Charging (BLNK)
In the last month, Blink Charging (NASDAQ:BLNK) stock has surged by 46%. The rally from deeply oversold levels has been on the back of positive business metrics. I remain bullish on the stock for the coming quarters.
For Q3 2023, Blink reported revenue growth of 152% on a year-on-year basis to $43.4 million. For the same period, the Company reported a gross margin of 29.5%. With a presence in the U.S. and Europe, I expect revenue growth to remain stellar in the coming years.
However, BLNK stock is likely to trend higher due to the following factors: The Company expects to achieve positive adjusted EBITDA by December 2024. Of course, with operating leverage, margin expansion will likely be robust beyond 2024. Blink will also benefit from swelling recurring services revenue as the number of operational charging stations swells. It’s, therefore, a good time to consider exposure to BLNK stock.
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.
