The penny stock euphoria of 2021 was decimated the following year on the back of tight monetary policies. Things may be turning around, and investors may want to consider which penny stocks to buy now.
I believe this trend will continue with the outlook being positive for the S&P 500 index in 2024. It’s therefore a good time to consider some of the oversold penny stocks to buy now for a sharp reversal rally.
An important point to note is that I don’t expect the euphoria of 2021 to repeat anytime soon. I would therefore steer clear of purely speculative penny stocks. I would only look at penny stocks that represent companies with decent fundamentals.
These penny stocks to buy look oversold. A 100% rally in these stocks over the next few quarters wouldn’t surprise me. Let’s discuss the reasons to be bullish.
Ganfeng Lithium (GNENY)
Ganfeng Lithium (OTCMKTS:GNENY) stock is among the top penny stocks to buy after a correction of 47% in the last 12 months.
At a forward price-earnings ratio of 5, the stock looks poised to double in quick time. GNENY stock offers an attractive dividend yield of 3%.
As an overview, Ganfeng is China’s largest lithium compound producer. Given the demand for lithium in EV batteries, the company may have sustained value creation.
An important point to note is that Ganfeng has access to secure, high-quality supply of lithium raw materials. As an example, the company has secured the off taking rights to 76% of the phase I products from the Cauchari-Olaroz asset.
The project has an annual battery-grade lithium carbonate production capacity of 40,000 tons. With multiple off taking projects, the Company’s growth seems secured in the next five years.
Overall, I expect the positive trend in the company’s margin to continue. Ganfeng is likely to be a cash flow machine with capacity expansion and a bullish outlook for lithium prices.
Standard Lithium (SLI)
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Standard Lithium (NYSE:SLI) is another lithium stock from the penny stocks space. The reason for talking about lithium stocks at the onset is the fact that the metal has corrected by over 30% for the year.
With a positive outlook for the long term, this correction is a good time to accumulate quality stocks. SLI stock looks massively undervalued after a correction of 40% in the last 12 months.
The company’s asset valuation underscored my view on undervaluation. The Phase 1A Project and the South West Arkansas Project has a base case after-tax net present value of $3.7 billion. Further, the Bristol Lake project is spread over 45,000 acres and will add to the Company’s asset base. In comparison, Standard Lithium commands a market valuation of $550 million.
I believe that Standard Lithium would need to dilute equity to fund the construction of key projects. However, that’s not a concern considering the asset valuation. Further, once lithium trends higher, the NPV will also be revised on the upside.
Wallbox N.V. (WBX)
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I believe that the correction is overdone in some of the best EV charging stocks and a reversal rally is impending. Wallbox (NYSE:WBX) looks attractive after a plunge of 70% in the last 12 months.
For Q2 2023, Wallbox reported revenue of 33 million euros. There are two important points to note.
First, Wallbox derived 72% revenue from Europe and 21% from the United States. Further, 7% of revenue was from Latin America and Asia Pacific.
Therefore, the company is well diversified and as Wallbox expands global presence, growth is likely to be robust.
Further, the company delivered 350 units of Supernova DC fast chargers in Q2. On a year-on-year basis, the delivery of fast chargers swelled by 700%. Another point to note is that the company reported 17% of revenue from software and services.
DC chargers are likely to be the growth catalyst coupled with upside in recurring revenue. Wallbox is also focused on cash cost reduction and as key margins improve, WBX stock is likely to trend higher.
Hydrofarm Holdings (HYFM)
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Hydrofarm Holdings (NASDAQ:HYFM) stock looks significantly undervalued and is a potential multi-bagger with a 24 to 36 months’ time horizon.
As an overview, Hydrofarm is a manufacturer and distributor of controlled environment agriculture equipment and supplies. Given the growth in indoor farming coupled with a positive outlook for the cannabis industry (long-term), HYFM stock is attractive.
For Q2 2023, Hydrofarm reported a decline in net sales to $63.1 million. However, the Company’s gross profit margin expanded by 1,550 basis points to 23%. The company expects to report positive adjusted EBITDA and free cash flows for the year. This is a key catalyst for HYFM stock upside.
It’s worth noting that Hydrofarm believes that the total addressable market for its products is $12 billion globally. This provides ample headroom for growth and I expect the Company’s revenue to accelerate in the coming quarters. Federal level legalization of cannabis is an impending catalyst for growth acceleration.
Lucid Group (LCID)
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Lucid Group (NASDAQ:LCID) stock trades just above $5 and I believe that the stock is poised for a big reversal rally.
The stock has plunged by 65% in the last 12 months. Even after the decline, the short interest in LCID stock is at 24%. I expect a big short squeeze rally in the coming months.
At the onset, I want to emphasize that Lucid is not among the best EV stocks to buy and hold. I would look at the stock as a trading bet for few quarters than for long term investing. For the core portfolio, the likes of Tesla (NASDAQ:TSLA) and Li Auto (NASDAQ:LI) are attractive.
Among the positives, Lucid reported a cash buffer of $6.25 billion as of Q2 2023. Of course, with sustained cash burn, I expect further fund raising in the coming years.
The company is also on track for an annual production guidance of over 10,000 vehicles. Lucid Gravity production is expected toward the end of 2024 and will boost the Company’s growth outlook for 2025 and beyond.
Emeren Group (SOL)
Emeren Group (NYSE:SOL) stock has corrected by almost 30% for year-to-date. The penny stock looks undervalued at a forward price-earnings ratio of 6.9.
I would not be surprised if SOL stock doubles quickly from current levels.
Emeren Group is a global solar project developer and operator with focus on U.S. and Europe. For Q2 2023, the company reported revenue and EBITDA of $33.8 million and $8.8 million respectively. Revenue growth for the quarter was robust at 312% on a year-on-year basis.
It’s worth noting that Emeren Group has 2.6GW of advanced-stage solar project pipeline. The company has 8.8GWh of storage project pipeline. This provides strong revenue and cash flow visibility.
Emeren Group reported $107.1 million in cash and equivalents. With an asset-light model, the company has high financial flexibility. This will allow Emeren to invest in innovation driven growth. The Company will be developing battery energy storage systems in Italy.
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Bitfarms (NASDAQ:BITF) is among the penny crypto stocks to buy for multibagger returns. The basic assumption is that Bitcoin (BTC-USD) trends higher in 2024. This seems likely with Bitcoin halving due. Even if the cryptocurrency trades near previous highs, BITF stock is likely to deliver 5x returns.
Bitfarms is a Bitcoin miner with a mining capacity of 5.3EH/s as of Q2 2023. The Company’s capacity growth has been aggressive, which is likely to translate into robust revenue growth once Bitcoin trends higher.
Bitfarms has guided for further increase in capacity to 7EH/s by Q1 2024.
From a fundamental perspective, Bitfarms reported cash and digital assets of $48 million as of Q2 2023. Further, through aggressive deleveraging, the Company has reduced its debt balance to $16 million.
With a strong balance sheet, Bitfarms is positioned for sustained growth. Bitcoin trending higher would further increase the company’s financial flexibility as healthy cash inflow from operations can be expected.
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.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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