Within the universe of penny stocks, micro-caps are possibly the riskiest bet. They represent companies with a market valuation that’s below $250 million. These are, therefore, early-stage businesses or ideas that have plunged due to a lack of investor confidence. However, if sentiments change, these can be multibagger penny stocks.
It’s worth noting that penny stocks are associated with much speculation. Investors don’t look at this space for long-term ideas. However, the returns can go through the roof if the business takes off. Therefore, holding a few promising penny stocks for the long term is a good idea. Of course, business developments need to be revised constantly.
This column focuses on three micro-cap ideas representing companies with a promising growth outlook. If the business is well managed and financed, these stocks can be millionaires. Let’s, therefore, discuss the specific catalysts for being bullish on these potential multibagger penny stocks.
Multibagger Penny Stocks: Yatra Online (YTRA)
Yatra Online (NASDAQ:YTRA) is a micro-cap stock with 20x to 30x potential if the business continues to move in the right direction. The Indian online travel company is at an early growth stage and has a big addressable market that can translate into a multi-fold jump in revenue and EBITDA. Definitely one of the potential multibagger penny stocks.
To put things into perspective, Indians are expected to be the fourth largest global spenders on travel and tourism by 2030. In terms of value, total travel expenditures are expected to touch $410 billion by the end of the decade. This is a huge opportunity, and Yatra has a differentiating factor.
In the corporate travel market, Yatra Online has a leading market share in India. The company has more than 800 big corporate clients and an addressable employee base of more than seven million, which provides a big opportunity for growth.
Additionally, Yatra has been boosting its presence in the business-to-consumer segment. It’s also worth noting that Yatra has a cash buffer of $54 million. That’s more than 50% of the company’s market valuation. The cash will likely be utilized to make inroads into the consumer-direct business.
Blade Air Mobility (BLDE)
Blade Air Mobility (NASDAQ:BLDE) is another quality micro-cap stock that’s likely to deliver multi-fold returns. Amidst the volatility, BLDE stock has remained sideways in the last 12 months. I see this as a good opportunity to accumulate with business developments being positive.
As an overview, Blade Mobility provides air transportation alternatives to congested ground routes in the U.S. The business model is unique and asset-light. For Q1 2024, the company reported 13.8% revenue growth on a year-on-year basis to $51.5 million. While the company reported an adjusted EBITDA loss of $3.5 million, the guidance for the full year is to deliver positive adjusted EBITDA.
The important point is that the medical segment reported revenue growth (trailing twelve months) of 58% YOY to $136 million. Further, the segment adjusted EBITDA to $13.3 million. The passenger segment has negatively impacted the EBITDA margin. However, overall EBITDA will likely turn positive as growth sustains in the medical segment. At the same time, the passenger segment is expected to deliver better margins on operating leverage. Thus, I think it is one of the potential multibagger penny stocks.
Standard Lithium (SLI)
The general definition of a micro-cap implies a market valuation of less than $250 million. Standard Lithium (NYSE:SLI) trades marginally above that cut-off. That’s largely due to a rally of almost 40% in the last month. However, I am tempted to talk about the stock as the company is developing a major business. I believe SLI stock can be 20x to 30x in the next five years.
The first point is that Standard Lithium is a game-changing asset in South West Arkansas. The asset has a base case after-tax net present value of $4.5 billion. Further, the Lanxess project has an after-tax NPV of $772 million. Based on asset valuation, SLI stock is deeply undervalued. The reason is a decline in lithium price coupled with a lack of financing for the big projects.
However, earlier this month, Standard Lithium announced a partnership agreement with Equinor (NYSE:EQNR). The partnership is to develop the South West Arkansas and East Texas lithium projects. With critical financial support, I expect SLI stock to surge higher once lithium reverses.
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.
