Low-priced stocks are attractive as they provide an opportunity to create a diversified portfolio with limited funds. Additionally, there are speculative ideas among low-priced stocks that attracts investors for quick returns at the blink of an eye. There are several interesting stocks under $3 that are likely to trade in double digits before the end of 2025.
But a word of caution: several low-price stocks are purely speculative. The underlying business fundamentals are poor and these stocks rally on meme frenzy. However, the stocks under $3 I’m interested in have decent business fundamentals. I can spot specific impending catalysts in these businesses that can trigger a massive rally in the coming quarters.
The investment horizon can be extended depending on how the businesses progress. Let’s discuss the near-term reasons to be bullish on these stocks under $3.
Ring Energy (REI)
Ring Energy (NYSEAMERICAN:REI) is a deeply undervalued oil and gas stock to watch out for a breakout rally. REI stock remained sideways in the last 12 months and trades at a forward price-to-earnings ratio of 4x. This is a clear indication of a deep valuation gap.
Further, Ring Energy commands a market valuation of $350 million. In comparison, the company’s PV10 (present value of estimated future oil and gas revenues, net of forecasted direct expenses, and discounted at an annual rate of 10%) of oil and gas assets is $1.65 billion. This is another point that underscores the extent of undervaluation.
It’s worth noting that oil is gradually trending higher, now topping $83 per barrel. With multiple interest rate cuts likely in the next 12 to 18 months, oil may again breach the $100 per barrel mark. This is a key catalyst for a big rally for REI stock.
Ring Energy has an excellent track record of production growth. Between 2018 and 2023, production increased at a compound annual growth rate of 26%. Acquisitions support growth coupled with organic investments in assets. With positive free cash flows, Ring Energy maintains high financial flexibility to pursue aggressive organic and acquisition-driven growth.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) is a significantly undervalued cannabis stock poised for a breakout rally. Although TLRY stock has remained sideways in the last 12 months, business developments have been positive.
One factor that’s likely to translate into upside for the stock is an impending reclassification of cannabis as a Schedule III drug in the U.S. Recently, the company raised $250 million through an at-the-market offering. The objective of this effort is to pursue organic or acquisition-driven growth in the U.S. after the reclassification.
For the third quarter of fiscal 2024, Tilray reported international cannabis growth of 44% on a year-on-year basis. The company has been expanding its medicinal cannabis presence in new geographies. This is likely to ensure healthy growth momentum for this segment.
At the same time, Tilray diversified into the alcoholic beverages business. Currently, the cannabis company is also the fifth-largest craft beer brewer in the U.S. Tilray also launched its brand of non-alcoholic brews. The beer and beverages business is likely to support overall growth.
Bitfarms (BITF)
Bitfarms (NASDAQ:BITF) is a Bitcoin (BTC-USD) miner with massive expansion plans. While the stock trended higher by 53% in the last 12 months, it’s still undervalued. I would bet on multi-bagger returns from current levels in a quick time.
Bitcoin has been consolidating around $60,000 to $70,000. I expect a fresh breakout in the coming quarters, with rate cuts being the likely catalyst. Once Bitcoin makes new highs, BITF stock is likely to surge.
In terms of expansion plans, Bitfarms reported hash rate capacity of 10.4EH/s as of March. The mining company expects to increase capacity to 21EH/s by the end of the year. Further, capacity expansion is targeted at 35EH/s by the end of 2025. If Bitcoin remains in an uptrend, this is likely to translate into stellar revenue and EBITDA growth.
Bitfarms has a strong balance sheet with zero debt. Further, a liquidity buffer of $124 million provides flexibility for pursuing aggressive expansion in the next 18 months.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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.
On the date of publication, the responsible editor held a LONG position in BTC-USD.
