3 Penny Stocks Under $5 With Massive Upside Ahead
Investors know that the key to profit is return - and that means a willingness to take risks. The risk is of course relative and tends to go hand in hand with the potential return. Are you looking for a stock with huge potential returns, and you've probably found one with a higher risk profile too.
The highest returns usually go hand in hand with the lowest stock prices. If a stock is valued for just pennies, even a small increase in the share price will result in a huge return. This means that penny stocks - usually viewed these days as stocks priced below $ 5 - combine a perfect storm of market attractions: lower stock price, high return potential, and higher than usual risk.
Using the TipRanks database, we identified the details of three compelling stocks that Wall Street analysts said fit this low stock-high-upside profile of 100% or more.
Cinedigm Corporation (CIDM)
We're starting with Cinedigm, the LA-based entertainment company that specializes in content marketing and distribution in addition to digital cinema. Cinedigm is an independent film, television and digital production studio. The company distributes digital media through a variety of content advertising networks.
Back in June, CIDM shares rose sharply when the company announced its partnership with Vewd, the world's largest OTT software provider for smart TVs, a growing segment of the digital television world. Customers are shifting from cable television and increasingly to streaming. Working with a smart TV software company would give Cinedigm access to Vewd's installed customer base - more than 300 million smart TVs.
Sales in 2020 were relatively stable. For Q1, Q2, and Q3 sales were $ 7.74M, $ 6.02M, and $ 7.18M, respectively. The Q3 number holds the middle place in this area. However, the result fell short of expectations. With a loss of 23 percent per share, earnings per share were 17 cents below expectations. On a positive note, CIDM recorded a 27% year-over-year revenue increase in its core business of ad-based videos when needed.
5-star analyst Daniel Kurnos covers the stock for benchmark and gives a few reasons why he thinks Cinedigm "is becoming a much more intriguing investment proposition, especially at these levels: 1) Organic growth builds with the strategy of the Legacy channel lineup still on track to hit 30 channel milestone 12 months ahead of schedule; 2) A new hugely successful streaming roll-up strategy is emerging that Cinedigm does best is able to run with minimal competition. 3) No longer claims credibility or value on Cinedigm's digital projector inventory or the Starrise stake, both of which should ultimately benefit in a post-COVID world. "
In keeping with his bullish stance, Kurnos is pricing CIDM with a buy and his target price of $ 3.50 implies room for an impressive upside of 573% over the next 12 months. (To see Kurnos' track record, click here.)
Currently, CIDM has registered 2 ratings, making the stock a moderate buy. The shares sell for 53 cents, and the average price target of $ 2.75 suggests an impressive uptrend of 418% over the one year horizon. (See CIDM stock analysis on TipRanks)
The distribution of content relies heavily on marketing and monetization to generate their profits. This is where Kubient comes in. This cloud software company offers an ad platform that connects publishers and marketing directly to their target audiences. The company works with audience automation to collect data, connect brands, and create a transparent ad environment across digital channels.
Kubient is a new company on the stock exchange that only went public last August. The initial offering grossed $ 12.5 million and sold 2.5 million shares at $ 5 each.
In the first few months of public trading, which included the end of the third quarter of the calendar, Kubient reported solid sales results for the third quarter. Return on sales increased to $ 280,000 from $ 92,000 in the third quarter. The increase over the previous year was even more impressive at 400%.
Maxim analyst Jack Vander Aarde believes Kubient has a strong position to make real change in his industry. The five-star analyst writes about the company's potential: “KBNT's core offering, Audience Cloud, seeks to disrupt the digital advertising market valued at over USD 325 billion and address the current weaknesses in the industry. In 2019, advertisers lost ~ $ 42 billion to ad fraud, which is projected to become a $ 100 billion problem by 2023. However, Kubient has a potential breakthrough solution called KAI. [...] We forecast sales of $ 6.6 million in 2021, 211% year over year, and sales of $ 17.4 million in 2022, up 164% year over year. The business is highly scalable and should release significant operational leverage as sales increase. "
To do this, Vander Aarde rates KBNT with a Buy and a target price of $ 10. This number suggests an upward growth of 154% from the current share price of $ 4. (Click here to see Vander Aarde's track record.)
Orion Group Holdings (ORN)
The construction industry is reminiscent of house building and the hard hats that build skyscrapers, and that's the common experience most of us have. However, Orion Group Holdings occupies a specialized niche in the industry, focusing on civil shipbuilding, industrial and commercial concrete. The company has subsidiaries, each focused on a different niche, allowing them to hone their skills in a number of key - albeit less recognized - sectors of the construction industry.
The company's share price this year shows both its resilience and the importance of the construction industry to the economy. ORN stocks fell sharply in mid-winter as the coronavirus hit the economy hard by forcing lockdown measures. However, with the reopening of the economy, it has regained ground, making up more than half of its losses from that period. Overall, however, ORN is still down ~ 20% since the beginning of the year.
Orion's quarterly results also show the story. The company posted a sequential loss in the first quarter but has posted gains since then. For the third calendar quarter, ORN reported sales of $ 189 million. EPS did even better this year, beating forecast in the first quarter when a loss was expected and actual earnings were 8 percent per share - and 23 cents per share, or 187% above, in the third quarter the forecast has risen.
In a positive development towards the end of the year, Orion's concrete segment won three major contracts in Texas in November. The projects are located in the Houston area and total approximately $ 52 million.
The noble analyst Poe Fratt believes this stock offers room for growth and the promise of returns for investors. He writes: “[We] believe that the current share price does not adequately reflect the improvements in the ISG restructuring and the positive outlook. A combination of an above-average order backlog, improved profitability, lower financial leverage and an attractive EBITDA rating of 2.8x 2020E and EBITDA of 2.4x 2021E supports our view that the risk / reward profile remains strong. "
Fratt's target price of $ 8.25 implies an upward trend of 101% for the coming year. He rates the stock as outperforming (i.e. buying). (To see Fratt's track record, click here.)
The two most recent buy ratings for ORN make the analyst consensus a moderate buy. The average target price of $ 8.13 suggests 100% growth potential for the next year. The shares are currently selling for $ 4.08. (See ORN stock analysis on TipRanks)
To find great ideas for trading penny stocks at attractive valuations, visit TipRanks' Best Stocks to Buy, a newly launched tool that brings together all the insights into TipRanks stocks.
Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.
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