Carvana (NYSE:CVNA) stock was trading below $5 at the beginning of January 2023. In just over a year, CVNA stock has delivered 17x returns. Clearly, it does not take time for penny stocks to blast higher on a few positive catalysts.
Of course, this should not be a reason to go overweight on penny stocks. Portfolio exposure to these high-risk bets needs to be limited to 10% to 15%. Even this exposure will likely have a significant impact if investors hold a few penny stocks that can 10x.
This column talks about three non-speculative penny stocks that can be 10-bagger stories in the next 12 months. These stocks represent companies with good fundamentals and possible catalysts for a massive rally. The assumption is that these catalysts are triggered. However, in the worst-case scenario, the upside will be delayed.
Let’s talk about the factors that can translate into multibagger returns from these stocks in the blink of an eye.
Bitfarms (BITF)
Even as Bitcoin (BTC-USD) surges higher, Bitfarms (NASDAQ:BITF) stock has been subdued. The reason is a recent at-the-market equity offering of $375 million. However, I believe BITF stock will likely go ballistic after some consolidation. Further, 10x returns from current levels are likely with two major assumptions.
First, Bitcoin currently trades at $70,000. If the digital asset zooms past $100,000 in the next 12 months, BITF stock will surge. Analysts expect Bitcoin could trade at $115,000 after halving. Therefore, this assumption is likely to be true.
Further, Bitfarms reported a hash rate capacity of 6.5EH/s as of February. The company has ambitious expansion plans and is targeting a capacity of 21EH/s by the second half of the year. If it can achieve this aggressive expansion target, BITF stock will surge. A high Bitcoin price coupled with massive capacity expansion will translate into stellar revenue and cash flow growth.
Tilray Brands (TLRY)
Just after Joe Biden was elected President in 2021, Tilray Brands (NASDAQ:TLRY) stock skyrocketed. However, with regulatory headwinds, TLRY stock has declined and remained subdued.
With the presidential election right around the corner, I expect another big rally for the stock. From current levels, 10x returns is a cakewalk considering the following assumptions. First, cannabis is reclassified from Schedule I to Schedule III drug by the U.S. Drug Enforcement Agency.
Further, there is clarity about the presidential candidate’s stance on the urgency to legalize cannabis at the federal level. If hopes seem high for legalization in 2025, TLRY stock will surge.
Besides that, business developments have been positive. For Q2 2024, Tilray reported revenue growth of 34% year-on-year to $194 million. Growth was supported by the medicinal cannabis segment in European markets. The company also expects to deliver positive adjusted free cash flow during the financial year.
Standard Lithium (SLI)
Standard Lithium (NYSE:SLI) can be another potential 10-bagger in quick time. After plunging by almost 65% in the last 12 months, SLI stock looks deeply undervalued. The correction didn’t come as a surprise, with lithium trending lower.
However, it’s worth noting that Standard Lithium currently has a market valuation of $214 million. In comparison, the company’s key asset has an after-tax net present value of $4.5 billion. If we consolidate other assets, the after-tax NPV is more than $5 billion. Clearly, SLI stock is massively undervalued.
I would, however, bet on 10x returns in the next 12 months based on the following assumptions. First, lithium stabilizes and starts recovering from deeply oversold levels. Further, Standard Lithium secures financing for its key asset, which requires a capital investment of $1.2 billion. In a recent example, Lithium Americas (NYSE:LAC) secured financing from the U.S. Department of Energy, and the stock surged by almost 60% within one month.
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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.
