This article defines penny stocks as stocks that trade for less than $5 per share. Some companies may have revenue coming in the door at this level, but many are not yet profitable.
With the risk-off sentiment that gripped investors for much of 2023, unprofitable companies were left behind. That sentiment started to change in November and accelerated after the Federal Reserve struck a more dovish tone after their latest meetings.
If that’s the case, then penny stocks, most of which are small- or micro-cap companies, are likely to lead the charge. Throughout the market’s history, small-cap stocks have typically led the way in bull markets.
Some investors swear off penny stocks as carrying too much risk. If you’ve ever played Fantasy Football, it might help to think of penny stocks as your last pick in the draft. It’s a player flying under the radar that you believe may pay off later in the season. You’re not counting on it for much, and you can always cut your losses if the player doesn’t pan out.
Viewed like that, here are three penny stocks that offer solid growth outlooks in 2024.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) is a Swedish manufacturer of luxury electric vehicles (EVs). The EV sector has been disappointing for investors in 2023. Demand has not grown as expected, and many EV startups have difficulty ramping up production in an environment with a higher interest rate.
That would seem to give Polestar an advantage. It’s forecasting delivery of 60,000 EVs in 2023. The problem is that’s down from the 80,000 it originally forecast. And, like many EV companies, Polestar is not a picture of financial health.
But, unlike some other EV companies that are trading as penny stocks, the company is already producing EVs. And while the guidance is lower, the company produced 13,900 vehicles in the last quarter, 50% more than it did in the same quarter in 2022. Plus, it debuted its Polestar 4 in November and plans to debut two more models between now and 2026.
It’s possible that negative sentiment in the EV space could drag PSNY stock lower. However, analysts give the stock a $4.26 price target, which is 86% higher than its current price. And the stock has as many strong buy ratings as it does strong sells.
Like the EV sector, Polestar forces investors to ask many questions. But, at the very least, Polestar has some favorable answers.
Rocket Lab USA (RKLB)
Rocket Lab USA (NASDAQ:RKLB) successfully conducted the 42nd successful launch of its Electron rocket on December 15. And RKLB stock promptly sold off hard. That gives new meaning to the phrase “selling the news,” but investors are used to it.
If that truly is a pattern, then investors had better buckle in. Rocket Lab is committed to a full launch schedule for the Electron, which is a disposable (i.e., not reusable) rocket.
However, an even bigger catalyst may be coming in 2024. That’s when the company plans to launch its Neutron reusable rocket. The company has no plans to compete with SpaceX regarding large payloads, but the Neutron will allow it to compete with the company on smaller payloads. A key point for investors to take note of is that Rocket Lab is already launching rockets. Many of its competitors are not. And in a higher interest-rate environment (for now), those companies will face a higher cost of capital to catch up.
Overseas Shipholding Group (OSG)
As I researched this article, Overseas Shipholding Group (NYSE:OSG) traded for less than $5. What a difference 24 hours makes. The stock is up over 6% in the week of December 18 and is now just above the $5 mark. Still, it’s traded as a penny stock for most of 2023, so you can still consider it a penny stock.
Overseas Shipholding Group transports crude oil and other petroleum-related products in the United States Flag Trade. That means the company’s revenue and earnings are subject to the whims of the oil industry. In 2022, the company’s top and bottom lines began to show strong improvement as global oil demand began to return to pre-pandemic levels. That allowed the company to buy back nearly $30 million of its shares in the last quarter.
Of course, it also means that the company’s stock is closely tied to geopolitical events. The attacks on shipping vessels in the Red Sea will likely be beneficial to shippers like OSG as their tankers will have to take a longer, and more expensive, route.
In fact, that attack was likely the catalyst that pushed the stock above $5. If price is your sole objective, then you may have to act quickly on OSG stock.
On the date of publication, Chris Markoch did not have (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.
