Many investors dream of getting in early on the next big tech startup that will turn into a behemoth like Google (NASDAQ:GOOG, NASDAQ:GOOGL) or Amazon (NASDAQ:AMZN). Finding and investing in the next unicorn company while it is still in its infancy would lead to almost unfathomable returns. However, picking winners is easier said than done. For every Google or Facebook, thousands of failed startups and penny stocks never amount to much. It’s like trying to find the proverbial needle in a haystack.
While it may be next to impossible to predict which fledgling tech companies will become the next Google, that doesn’t mean you can’t generate substantial returns from investing in tech penny stocks. The key is being selective and sticking with quality companies that have a big growth runway and a viable path to profitability. Many of today’s tech giants were once small, speculative tech stocks. Buying these penny tech stocks in their early days can pay off in a big way over the long run.
Penny Tech Stocks: CI&T Inc. (CINT)
CI&T (NYSE:CINT) is an AI-powered digital products company that I believe could deliver multibagger returns from its current cheap valuation. In addition to AI, the company is involved in other hot growth sectors like cloud services. The stock has been consolidating sideways for the past couple of months but appears to be bottoming out. I expect shares to start cruising higher again soon on the back of robust growth and expanding margins.
The consensus earnings estimates for CI&T paint quite a bullish growth picture. EPS is projected to skyrocket from 28 cents in fiscal 2024 to $1.10 in 2027. Not too shabby! On the top line, revenues are forecast to more than double from $448 million to $932 million over that same period.
You’re paying just 4.1 times 2027 earnings. Once sentiment shifts back in favor of growth, this stock could be off to the races.
WidePoint Corporation (WYY)
WidePoint (NYSEMKT:WYY) is a tiny technology management service provider catering to government and business clients across North America and Europe. The company’s Trusted Mobility Management (TM2) solutions combine telecom lifecycle management, bill analytics, and mobile identity management. In a nutshell, they help secure and protect mobile workforces and enterprise IT environments.
WidePoint is highly speculative given its minuscule $19 million market cap. Shares doubled from November 2023 through January 2024 but have slid since then. However, the valuation still looks cheap to me, so I wouldn’t be surprised to see the stock quickly reverse course and head higher again.
The main thing WidePoint has going for it is a customer base that includes the U.S. government. From my experience, once you’re in with the feds, that recurring revenue tends to be very sticky. However, with such a small company, be prepared for some violent stock swings in both directions. This is not a stock for the faint of heart, but more speculative investors may find the risk/reward intriguing.
Penny Tech Stocks: CuriosityStream Inc. (CURI)
CuriosityStream (NASDAQ:CURI) is a subscription video streaming service specializing in documentaries and other factual content like science, history, and nature programming. I view it as a differentiated player in the crowded streaming wars. As digital media consumption continues rising, I believe CuriosityStream is well-positioned to benefit from its unique content catalog sourced from some top documentary creators.
Many of these content creators have huge followings on platforms like YouTube but also produce exclusive material for CuriosityStream. As the company’s content library expands, I expect its brand equity and subscriber base to grow in tandem. CuriosityStream is still unprofitable, but that may change in the not-so-distant future.
Consensus estimates show CuriosityStream’s net losses narrowing over the next few years before reaching breakeven in 2026 with EPS of 5 cents. At the same time, revenue growth is expected to accelerate to nearly 15% that year. Rising revenues combined with drastically improving margins suggest profitability is on the horizon. If CuriosityStream can scale its subscriber base and content portfolio while keeping costs contained, it could be one of the top gainers among penny tech stocks.
Rimini Street (RMNI)
Rimini Street (NASDAQ:RMNI) provides third-party support for mission-critical enterprise software platforms like Oracle and SAP. They help organizations run, manage, and maintain these systems even after official vendor support ends. Rimini’s services save clients money and ensure smooth operations of their IT infrastructure.
RMNI’s chart looks quite ugly when you zoom out over just the past year. Recent performance hasn’t been stellar either. However, I believe shares can stage a significant recovery from current levels as the company’s financials improve. Moreover, the stock trades at a dirt cheap 6 times forward earnings. You’d be hard-pressed to find many other profitable companies with a big growth runway trading this cheaply.
The earnings estimates for Rimini Street suggest a period of steady growth and profitability improvement ahead. EPS is forecasted to increase from 45 cents in 2024 to 58 cents in 2025, up 30% year-over-year (YOY). Revenues are also projected to reach $471 million in 2025 from $436 million in 2024.
Another thing I like about Rimini is the stock has seen negligible dilution thanks to profits picking up after a temporary downturn in 2022. Management isn’t relying on endless share issuances to fund the business. This should provide a nice tailwind in the years ahead.
Penny Tech Stocks: Xunlei Limited (XNET)
Xunlei Limited (NASDAQ:XNET) operates an internet platform in China, leveraging cloud technology. The company focuses on shared cloud computing and blockchain technology to provide solutions for digital content.
XNET stock has been trading sideways for the past two years. But I believe a breakout could happen soon as the company’s financials continue growing significantly and it focuses more on higher-margin cloud-based services. One thing that really stands out to me is Xunlei’s massive cash position of $272 million. That’s nearly triple the company’s entire market cap of just $98 million!
Xunlei also heavily invests in R&D, which could pay off big time if it can become a tech powerhouse in the future. Regardless of the R&D potential though, I find XNET shares to be extremely undervalued right now. This is a profitable tech company with a huge runway for growth, yet it trades at a measly 7 times trailing earnings. In my view, the stock is a coiled spring ready to deliver multibagger returns going forward.
TrueCar (TRUE)
TrueCar (NASDAQ:TRUE) is a digital automotive marketplace aiming to be the most transparent brand in the industry. It empowers car buyers by showing them what others paid for the vehicle they want, helping them recognize a fair price. TrueCar connects these consumers to certified dealers, facilitating a personalized and efficient car buying experience.
Like other automotive stocks, TrueCar hasn’t fared too well recently as rising interest rates caused people to cut back on big-ticket purchases like cars. However, this trend is starting to change as rates stabilize and consumers adjust to the new normal. TRUE stock has been rangebound between $3 to $5 for most of the past five years. But I believe it could soon break out to the upside as the company’s top and bottom lines begin turning around.
The earnings estimates for TrueCar indicate a gradual return to profitability over the next several years. While a small loss of 4 cents per share is projected for 2024, earnings are expected to flip to positive in 2025 and grow steadily from there, reaching 35 cents per share in 2029. Revenue growth is also forecasted to be robust, with double-digit increases each year, hitting $317 million by 2029 from $183 million in 2024.
The improving fundamentals make it unlikely TRUE shares remain stuck in their current range as the core business rapidly grows. The stars are aligning for this automotive marketplace to shift into a higher gear.
Blend Labs (BLND)
Blend Labs (NYSE:BLND) provides a cloud-based software platform for financial services firms in the U.S. It operates two main segments: Blend Platform and Title365. The Blend Builder Platform offers products powering digital-first consumer journeys for mortgages, home equity loans, vehicle loans, and more. The company also provides title search procedures and other professional services.
BLND stock has struggled mightily the past few years, down a staggering 85% over the past five. But shares have shown signs of life recently, skyrocketing 254% in the past year alone as Blend’s consumer banking segment picks up steam. I expect the strong performance to continue long-term as well.
As I touched on earlier, elevated interest rates caused many folks to delay borrowing money for major purchases. This weighed on Blend’s business since it meant fewer customers taking out loans. However, the Fed is widely expected to cut rates three times this year. Once that process begins, borrowing activity should pick up considerably, boosting Blend’s top and bottom lines.
The company is forecast to turn profitable in 2026, with revenue growth accelerating to around 30% annually. Perhaps more exciting, significant margin expansion could be in the cards as Blend’s automation and AI initiatives start bearing fruit. If management can execute, I wouldn’t be surprised to see the stock deliver triple-digit returns in the coming years.
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.