With penny stocks, investors can expect the unexpected.
Carvana (NYSE:CVNA) stock was trading at $4.7 in the beginning of 2023. In just over a year, CVNA stock has surged by 15x. Of course, not all bullish stories among penny stocks will deliver 10x to 20x returns in quick time. However, multiple ideas can deliver multibagger returns within the next 18 to 24 months. This column focuses on seven penny stocks with five-bagger potential before the end of 2025.
An important point to note is that penny stocks are often associated with pure speculation. However, I have focused on ideas where a rally is impending and backed by good fundamentals. Further, there are potential business catalysts that can translate into massive upside.
With the likelihood of rate cuts in the second half of the year, the market outlook is positive. Further, easy money increases trading and speculative activity. Penny stocks are, therefore, likely to be in the limelight. Let’s discuss the reasons to be bullish on these ideas.
Archer Aviation (ACHR)
In my view, the next 24 months will likely be exciting for some of the best eVTOL stocks. Archer Aviation (NYSE:ACHR) is worth considering for multibagger returns as the company moves toward the commercialization of flying cars.
It’s worth noting that Archer already has an order backlog of $3.5 billion. That backlog assumes the selling price of one eVTOL aircraft is $5 million. This year, Archer expects to complete the construction of the manufacturing facility for the production of 650 aircraft annually. Once mass deliveries commence, I expect a strong upside in revenue.
An important point to note is the backlog is from the United States, UAE and India. Archer is, therefore, making inroads in the global markets. With commercialization in 2025, I expect the backlog to swell further. Archer closed 2023 with a liquidity buffer of $625 million. So, the company has ample flexibility for investments in the next 12 to 18 months.
Bitfarms (BITF)
With Bitcoin (BTC-USD) skyrocketing, it’s difficult to ignore crypto stocks. Further, I expect the rally for Bitcoin to sustain with the possibility of expansionary monetary policies in the second half of 2024. Bitfarms (NASDAQ:BITF) looks undervalued even after a rally of nearly 180% in the last 12 months. With some big expansion plans, I expect BITF stock to go ballistic relatively soon.
It’s worth noting that as of Q4 2023, Bitfarms reported a liquidity buffer of $118 million. Further, the company has a zero-debt balance sheet. With strong fundamentals, Bitfarms is positioned to make aggressive capital investments in 2024 and beyond.
As of February, Bitfarms reported a hash rate capacity of 6.5EH/s. The company is targeting to increase capacity to 21EH/s by the end of the year. If Bitcoin continues to trend higher, I expect stellar growth in revenue and cash flows. That will provide flexibility for expansion beyond this year.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) stock has remained depressed even as business developments have been encouraging. I expect a strong reversal if the coming quarters remain strong for the company.
Recently, Germany legalized the recreational use of cannabis. I expect other European countries to follow suit. Further, it’s estimated the U.S. cannabis market will be worth $71 billion by 2030, even without federal-level legalization. I must add here that the medical marijuana market is expected to grow at a CAGR of 22% through 2027. All these numbers point to a potential acceleration in growth for Tilray in the coming years.
In 2023, Tilray pursued multiple acquisitions and has positioned itself as the fifth-largest craft beer brewer in the United States. Besides the likelihood of steady growth, the company has established a strong strategic infrastructure in the country. That will support aggressive cannabis expansion on potential federal-level legalization.
Lithium Americas (LAC)
The best time to buy a sector or stock is when the bearish sentiments are at their peak. Of course, there must be a fundamental factor that backs the buy thesis. Lithium has plunged, but analysts are expecting the lithium shortage to come as soon as 2025. Therefore, it’s a good time to buy deeply undervalued lithium stocks. I believe Lithium Americas (NYSE:LAC) is attractive and poised for multibagger returns.
As an overview, Lithium Americas has ownership of the Thacker Pass project in the United States. The project is likely to be a cash flow machine with a mine life of 40 years and an average annual EBITDA estimate of $1.1 billion.
It’s also worth noting that the asset has an after-tax net present value of $5.7 billion. That indicates significant undervaluation, with Lithium Americas commanding a market valuation of $865 million. Therefore, once lithium trends higher, I expect quick returns from the stock.
IAMGOLD (IAG)
With gold trading above $2,100 an ounce, it’s a good time to consider exposure to quality gold miners. I expect gold to rally further with the likelihood of rate cuts in the second half of the year. Among penny stocks, IAMGOLD (NYSE:IAG) looks undervalued at a forward price-earnings ratio of 29.8.
From a financial perspective, IAMGOLD reported a liquidity buffer of $754.1 million as of Q4 2023. Strong financial flexibility coupled with the visibility of healthy cash flows make the story attractive. I expect the company to pursue aggressive organic and acquisition-driven growth.
Another point to note is that the company’s Côté Gold asset will commence production this month. It’s the third-largest gold mine in Canada, providing strong production upside visibility for 2024 and beyond.
IAMGOLD is positioned to benefit from higher realized gold prices coupled with healthy production growth. I would not be surprised if it initiates dividends this year. That’s another potential catalyst for a stock re-rating.
Aker Carbon Capture (AKCCF)
Aker Carbon Capture (OTCMKTS:AKCCF) is another interesting name among penny stocks poised for multibagger returns. The company is a provider of products, solutions and technology in the field of carbon capture. Without a doubt, the addressable market is huge, with a global focus on decarbonization. Aker Carbon already has 60,000 operating hours of execution, with 7 carbon capture units being delivered.
Further, it’s worth noting that Aker has strong growth visibility with an order backlog of 2.6 billion Norwegian krone. With proven technology, the backlog will likely continue to swell. Aker Carbon is targeting to secure contracts to capture 10 million tons of CO2 per annum by 2025.
Recently, the company was awarded a milestone project in the United States. The country alone is expected to reach a total volume of 200 million tons of carbon capture by 2030. Clearly, there is immense growth potential, and Aker Carbon has an early mover advantage.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) is a beaten-down penny stock that looks attractive for a big reversal. As an overview, the company is working towards the commercialization of solid-state batteries. My conviction is backed by the point that Solid Power has strong automotive partners like BMW (OTCMKTS:BMWYY), Ford (NYSE:F) and SK on.
In terms of positive developments, Solid Power successfully delivered A-1 Sample cells in October 2023 to enter the automotive qualification process. In the current year, the company is focusing on advancing cell design for A-2 Sample specifications.
An important point to note is that in December 2022, the company licensed its cell design and manufacturing process to BMW for parallel R&D. That can potentially help in accelerating the commercialization timeline.
With the deepening of its partnership with SK On, the company is also working towards boosting its presence in Korea. That would help expand the addressable market. I must add that with $415 million in cash, I don’t see any need for dilution in the next 12 to 18 months.
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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.
