The stock market rally has been showing no sign of stopping, and while most of it has been driven by Big Tech, it is worth looking into some little-known penny stocks. These stocks usually see huge breakouts and trade at big premiums during bullish rallies. We haven’t seen that happen across most penny stocks just yet, but I think it’s a good reason to buy up some high-potential names if you are willing to stomach the risks.
Of course, many of these penny stocks are more than just short- to mid-term plays. Most of these up-and-coming firms have huge growth runways, and analysts expect explosive growth over the next decade. If they execute as expected, I believe it is possible that they could turn a $10k investment into something life-changing. Let’s take a look!
OptiNose (OPTN)
OptiNose (NASDAQ:OPTN) is a specialty pharmaceutical company focused on developing products for patients with diseases treated by otolaryngologists and allergists. I’ve been closely watching this little-known penny stock, and I believe it could be a potential hidden gem for risk-tolerant investors.
Their lead product, XHANCE, has shown strong efficacy in treating chronic sinusitis, which, according to their market research, is a key driver of prescribing behavior.
OptiNose is admittedly a speculative bet, but I think the potential payoff could be substantial. The stock has been stuck trading around the $1 level for over a year, but with these promising developments, I wouldn’t be surprised to see a breakout if they can execute well.
What I particularly like about OptiNose is its solid and rapidly growing sales base. Analysts are projecting revenue to skyrocket from $92 million in 2024 to $342 million by 2028, with profitability expected by 2026.
If everything goes according to plan, the stock is trading at just 3 times 2027 earnings estimates right now.
Of course, the key question is whether their growth plans will play out as hoped. Biotech and pharma startups are always a risky bet. But OptiNose seems to have weathered the worst and has a strong foundation upon which to build. This beaten-down stock could be a hidden multibagger in the making. Just be sure to do your own diligence.
Unusual Machines (UMAC)
Unusual Machines (NYSEMKT:UMAC) manufactures drones and drone components. I’m very bullish on drone startups like Unusual Machines. There simply aren’t enough of these companies in the U.S. right now, especially ones focused on producing inexpensive military drones for reconnaissance and combat purposes.
Most of those cheaper military drones are currently mass-produced in China and Russia. Meanwhile, the U.S. relies on a handful of giant defense contractors making very expensive drones. I believe this supply chain vulnerability is becoming increasingly apparent to governments worldwide. They’re scrambling to ink deals with promising upstart drone makers to diversify their sources.
That’s where Unusual Machines comes in. Sure, with just $619,000 in sales (the sales were made in just 45 days) last quarter, it’s tiny and unprofitable. However, after a recent $5 million IPO and acquiring key operating units like Fat Shark and Rotor Riot, this Red Cat Holdings (NASDAQ:RCAT) spinoff has big potential, in my view. Management is moving fast to start churning out NDAA-compliant drone parts from its new Orlando headquarters.
If it can secure those critical “Blue UAS” certifications soon, lucrative government contracts could follow and really jumpstart growth. Of course, this is an extremely speculative play. I’m banking on a rosy future that may not materialize. UMAC is only suitable if you seriously want to turn $10k into a million and take on the risks that come with it.
High Tide (HITI)
High Tide (NASDAQ:HITI) operates as a retail-focused cannabis company. I covered this little-known penny stock over a year ago, and it’s already up by a whopping 80% since then, but I believe High Tide still has substantial upside potential. High Tide generated 9.4 million CAD in free cash flow in Q2, more than the prior two quarters combined. It’s a rare gem in the cannabis space that isn’t burning cash and is on the cusp of sustained profitability.
Once High Tide firmly establishes consistent earnings and accelerates its expansion, I expect this stock could deliver multibagger returns from current levels based solely on the Canadian market opportunity. However, the real game-changer would be U.S. federal cannabis legalization. High Tide already has a footprint in the U.S. but operates with restraints.
If it can replicate its Canadian success in a market 10 times larger, this under-the-radar stock could turn a $10k investment into something much more meaningful.
Blackline Safety (BLKLF)
Blackline Safety (OTCMKTS:BLKLF) is a Canadian industrial safety company that is riding the wave of onshoring and industrialization. Shares have already surged 150% from their late-2022 trough, but I think there’s plenty of room for this rebound to run. The stock still trades nearly 40% below its February 2020 peak despite the company being perfectly positioned to capitalize on the manufacturing renaissance in the U.S. and Canada.
As companies bring production closer to home, they must ensure their facilities meet the rigorous safety standards in these markets. That’s where Blackline shines. Its connected safety technology is already seeing booming demand, with revenue jumping 31% YOY to a record $31.6 million in Q2.
Blackline achieved this growth while also expanding its gross margins to 57% and slashing its cash burn by 78%. This tells me that as the company scales up to meet the surging need for industrial safety, its bottom line could boom.
So, while Blackline may be under the radar now, I believe it’s a hidden gem that won’t stay hidden for long.
Talkspace (TALK)
Talkspace (NASDAQ:TALK) is a leading virtual behavioral health company that connects individuals with licensed therapists through its platform. While telemedicine stocks were all the rage during the COVID-19 pandemic, Talkspace’s shares have been on a wild ride since going public. After a sharp decline, the stock surged nearly 500% from Q1 2023 to Q1 2024 before recently pulling back around 43%. I believe this presents an attractive entry point.
In Q1 2024, Talkspace delivered 36% YOY revenue growth to $45.4 million and achieved its first quarter of profitability with an $800,000 adjusted EBITDA. Management’s execution on expanding covered lives, and driving utilization is clearly paying off. The recent Medicare launch in multiple states offers another significant growth catalyst.
With profits expected in 2025, along with a projected 26% sales growth in 2024 and 17-20% annual increases thereafter, I see ample room for upside. Talkspace is well-positioned to benefit from powerful tailwinds. This includes the destigmatization of mental health and younger generations preferring to do everything online.
Kneat.com (KSIOF)
Kneat.com (OTCMKTS:KSIOF) provides software validation solutions for the life sciences industry. The stock has rebounded significantly, up 37% in the past six months alone. I believe Kneat is well-positioned to benefit from the plethora of biotech startups that need validation software to ensure compliance with industry regulations.
In Q1, Kneat’s annual recurring revenue jumped an impressive 57% to 42.1 million CAD. The gross profit margin expanded from 67% to a robust 74%, while operating expenses grew at a much more modest 17% pace compared to the 77% surge in Q1 2023.
Management noted they are landing major new customer wins across North America, Europe, and Asia, which are fueling the growth. However, the real potential lies in expanding these relationships over time. As Kneat becomes ingrained and trusted within organizations, it can multiply its revenue per customer.
GuruFocus’ DCF model believes the stock will compound through 2026.
One Stop Systems (OSS)
One Stop Systems (NASDAQ:OSS) designs and manufactures high-performance edge computing systems for AI and other applications. Despite seeing a 24.6% YOY revenue decline to $12.65 million in Q1 2024, I believe OSS is poised for a strong rebound as AI takes off.
The company has done a stellar job shifting its focus to the booming defense and commercial markets, especially for AI and machine learning at the edge. CEO Mike Knowles noted OSS has expanded its 5-year pipeline to over $1 billion, with 70% from multi-year platform opportunities that should drive more predictable revenue.
While the near-term upside may be limited as many AI/ML applications are still in development and testing phases, I’m confident OSS is very well-positioned for the coming wave. HPC and enterprise computing needs are exploding as AI startups proliferate, and transformative systems like OpenAI’s Sora could send demand soaring even higher.
OSS is admittedly a high-risk, high-reward bet in this nascent industry. But for investors willing to stomach the volatility, I believe getting in early on OSS’s turnaround story could deliver incredible returns if the AI rally keeps charging ahead in the years to come.
On the date of publication, Omor Ibne Ehsan 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
