Undervalued penny stocks are probably the most sought-after names for retail investors. Besides the low-price factor, penny stocks are known for providing some high adrenalin price-action. However, it’s also a space for speculation and losses can be significant if wrong bets are made. My basic idea is to screen undervalued penny stocks and hold them for the medium term.
It’s important to note that speculative activity is high among undervalued penny stocks. Then again, we also have to consider that not all penny stocks have poor fundamentals. After all, there are some quality ideas that can deliver multi-bagger returns.
I would, however, refrain from considering more than 10% to 15% exposure to undervalued penny stocks. It’s a high-beta bet and considering the global macroeconomic scenario, I would remain overweight on blue-chip and high-quality growth stocks instead. That said, here are a few of the top, most undervalued penny stocks to bet on.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) is a deeply undervalued name among flying car penny stocks. My view is based on the potential growth in the next five years with the commercialization of eVTOL aircraft due in 2025. Helping, Archer announced a collaboration under the NASA Space Act Agreement. This partnership will focus on achieving the highest levels of battery cell safety and systems for Advanced Air Mobility and space applications.
It’s also worth noting that Archer has stitched partnerships for expansion in the UAE and India in 2026. With strong collaborations, the company is positioned for stellar growth once certifications are received.
From a backlog perspective, Archer has orders worth $142 million from the U.S. Air Force. Further, in November 2023, the company won a contract worth $500 million from Air Chateau International for 100 Midnight aircraft. I expect the order backlog to swell further this year.
Blink Charging (BLNK)
Blink Charging (NASDAQ:BLNK) fell by nearly 80% in the last 12 months. However, I do expect a strong rally from deeply oversold levels backed by positive business developments. With short interest in the stock at 37%, a massive short-squeeze rally seems likely.
For Q3 2023, Blink Charging reported stellar revenue growth of 152% on a year-on-year basis to $43.4 million. Further, the Company reported a 167% increase in gross profit to $12.8 million.
With significant room for penetration in the U.S. and Europe, revenue growth is unlikely to be a concern. The U.S. market alone is expected to require an investment of $100 billion by 2040 to boost the EV charging infrastructure.
However, the good news is that Blink Charging expects to deliver positive adjusted EBITDA by December 2024. It’s likely that EBITDA margin will continue to expand in the next few years with operating leverage.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) fell 36% for year-to-date. This does not come as a surprise with sentiments remaining negative for lithium. However, I am bullish on LAC stock for the long-term considering the asset potential.
As an overview, Lithium Americas has ownership of the Thacker Pass asset. It’s the largest known measured and indicated lithium resource in North America. The asset has a mine life of 40 years with an after-tax net present value of $5.7 billion. With an average annual EBITDA potential of $1.1 billion, Thacker Pass promises to be a cash flow machine.
It’s worth noting that General Motors (NYSE:GM) is a strategic partner in the asset and has committed to invest $650 million. Further, GM has an offtake agreement for phase one production for ten years. This ensures clear cash flow visibility once production commences.
Bitfarms (BITF)
For investors bullish on Bitcoin (BTC-USD), Bitfarms (NASDAQ:BITF) is an attractive pick. The Bitcoin miner looks undervalued even after a rally of 100% in the last 12 months. With significant expansion plans, the company is positioned for stellar revenue and cash flow growth.
To put things into perspective, Bitfarms reported a hash rate capacity of 6.5EH/s as of January. The Company is targeting a capacity of 12EH/s in the first half of the year. Capacity is further expected to expand to 21EH/s by the end of the year. With visibility to triple capacity, the growth outlook is robust.
It’s also worth noting that Bitfarms reported a liquidity buffer of $117 million as of December 2023. Further, the company expects to be debt-free this month. Therefore, financial flexibility is high for financing aggressive growth. If Bitcoin trades at new all-time highs this year, Bitfarms will generate ample cash flows to pursue the next leg of expansion in 2025.
Hecla Mining (HL)
Hecla Mining (NYSE:HL) is an interesting bet among precious metal penny stocks to buy. With a strong jobs report for January, HL stock has corrected as expansionary policies might not come relatively soon. However, the correction is a good accumulation opportunity with the Company positioned for healthy production growth.
For 2023, Hecla announced silver production of 14.3 million ounces. With the restart of operations at Lucky Friday and Keno Hill ramp-up, production growth is likely to be robust. Hecla has guided for 20 million ounces in silver production by 2025. If this is associated with upside in gold and silver prices, the Company will be positioned to report healthy free cash flows.
From a financial perspective, Hecla reported a liquidity buffer of $165 million as of Q3 2023. Further, with a net leverage ratio of 2.2, the Company has high financial flexibility. This is important to mention as Hecla has pursued acquisition driven addition to its portfolio of assets.
Blade Air Mobility (BLDE)
Blade Air Mobility (NASDAQ:BLDE) has been weak in the last few quarters. However, fundamentals have improved and the stock looks undervalued considering the growth outlook.
As an overview, Blade Air is a provider of air transportation alternatives to the congested ground routes in the United States. The Company has an asset-light business model and growth seems to be gaining traction.
For Q3 2023, the Company reported 56% revenue growth on a year-on-year basis to $71.4 million. It’s important to note that the Company achieved adjusted EBITDA profitability during the quarter. It’s likely that EBITDA margin expansion will sustain in the coming quarters on the back of operating leverage.
I must add that that the Company’s medical segment revenue growth has been healthy. Blade Air is involved in the air transportation of human organs for transplant in the United States. Being a necessity, this segment is likely to continue growing at a strong pace.
Overall, the business model is unique and there is increasing demand for air transport. BLDE stock is a potential multibagger from current levels of $2.9.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) is working towards the commercialization of solid-state batteries. If the Company can achieve success, I believe that SLDP stock can deliver 10x or 20x returns from current levels. Without doubt, it’s a high-risk bet, but some exposure can be considered after a correction of 55% in 12 months.
In terms of business progress, Solid Power shipped its first A-1 EV cell to BMW (OTCMKTS:BMWYY) to formally enter automotive qualification. If the validation testing yields positive results, SLDP stock is likely to skyrocket.
In another recent development, the Company has deepened its partnership with SK On. Under the agreement, Solid Power will install a pilot cell production line for SK On at the Korea facility. SK On will also be using Solid Power’s cell technology for research and development and to produce batteries. This agreement provides revenue visibility besides creating a parallel research and development platform.
Penny Stocks
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.