In this article, we will take a detailed look at the11Little-Known Penny Stocks With Massive Upside Potential.For a quick overview of such stocks, read our article5 Little-Known Penny Stocks With Massive Upside Potential.
Risky equities including penny stocks and micro-cap stocks started losing ground when the Federal Reserve began hiking interest rates to tackle the inflation storm. When rates are high and money is difficult to come by, investors exit risky asset classes and take refuge in either fixed income or high quality stocks with fortress balance sheets. But many experts believe things are about to take a positive turn for penny stocks, small- and micro-cap stocks in 2024 due to a variety of factors, including expectations of rate cuts in 2024. Lord Abbett in its 2024 market outlook report highlighted that in addition to interest rate cuts, another catalyst for small-cap stocks in 2024 could be an increased M&A activity where bigger companies will look to buy smaller companies with promising prospects.
Franklin Templeton Investments in its report highlighted several positive factors that could boost small-cap stocks in 2024. The report said small-cap stocks perform really well during 12 months following the final rate hike from the Federal Reserve.
"Surprisingly, in the 12 months that followed the first Fed interest rate hike in March 2022, the Russell 2000 was down -11.5% while the S&P 500 was down 7.0%. History shows that 1- and 3-year returns for both indexes were mostly positive following the nine previous initial tightening cycles by the Fed. At the same time, we know that the subsequent average one-year return for the Russell 2000 Index following the final rate hike is quite strong, averaging 18.4% going back to the mid 1990’s."
The Franklin Templeton report also said that while it remains cautious in the short-term when it comes to small-cap companies, its outlook on these equities for the long term is quite strong. The report said small-cap stock valuations look attractive now, with the Russell 2000 losing 30% from its last peak on 11/8/21 through the end of the third quarter of 2023. Franklin Templeton also said many stocks it analyzed seem to have recession already priced in.
"Both in terms of price-to-earnings (P/E) and EV/EBIT (enterprise value over earnings before interest and taxes), many small caps look undervalued to us. They look even cheaper compared to large caps. In fact, based on EV/EBIT, small caps remained close to 20-year lows relative to large caps at the end of September. So, the opportunity set in small cap does look compelling to us from a valuation standpoint."
Since there's seems to be a consensus among investors that the Federal Reserve is done with rate hikes and rate cuts are on the horizon, now might be the right time to see which penny stocks have the biggest upside potential from their current levels according to Wall Street analysts.
Methodology
For this article we first used a stock screener to identify penny stocks (trading under $5 as of February 6) with Buy or better ratings and high price targets set by Wall Street analysts. From this dataset we chose penny stocks with relatively lower trading volumes to make sure we only go with under-the-radar or little-known penny stocks. For all these stocks we listed average analyst price estimates using Wall Street price targets data provided by credible sources like Yahoo Finance, CNN Money, TipRanks, among others. We then chose 11 penny stocks from this data with the biggest upside potential from their current levels based on their average price targets set by Wall Street analysts.
11. Ecarx Holdings Inc. (NASDAQ:ECX)
Average Analyst Price Estimate: $10
Upside Potential: 90%
Automotive platform company Ecarx Holdings Inc. (NASDAQ:ECX) ranks 11th in our list of the best penny stocks to buy with upside potential according to Wall Street analysts.
The China-based company Ecarx Holdings Inc. (NASDAQ:ECX) in November posted third quarter results. EPS in the period came in at -$0.11. Revenue in the quarter totaled $148 million.
Out of the 910 hedge funds tracked by Insider Monkey, 19 hedge funds had stakes in Ecarx Holdings Inc. (NASDAQ:ECX).
10. Humacyte Inc (NASDAQ:HUMA)
Average Analyst Price Estimate:$7
Upside Potential: 91.78%
Humacyte Inc (NASDAQ:HUMA) makes implantable and bioengineered human tissues for the treatment of several diseases. The stock's one-year average price estimate according to Wall Street analysts is $7, while its stock price as of February 6 was $3.35. As of September 2023 Humacyte Inc (NASDAQ:HUMA) had cash and cash equivalents of $100.0 million.
Out of the 910 hedge funds tracked by Insider Monkey, nine hedge funds tracked by Insider Monkey had stakes in Humacyte Inc (NASDAQ:HUMA).
During its Q3 earnings call the company talked in detail about its financial situation:
"General and administrative expenses were $6.1 million for the third quarter of 2023 compared to $6.2 million for the third quarter of 2022, and were $17.5 million for the nine months ended September 30, 2023, compared to $17.1 million for the nine months ended September 30, 2022. The increase during the 9 months ended September 30, 2020, compared to the prior-year period resulted primarily from increased personnel costs, largely driven by preparation for the planned U.S. commercial launch of HAV in the vascular trauma indication. The slight decrease during the third quarter of 2023 compared to 2022 resulted primarily from a reduction in external services and professional fees, partially offset by an increase in personnel expenses. Other net income or expense was a net expense of $1.4 million for the third quarter of 2023 compared to a net expense of $1.8 million for the third quarter of 2022.
And other net expense was $11.8 million for the nine months ended September 30, 2023, compared to other net income of $55.5 million for the nine months ended September 30, 2022. The decrease in other net expenses for the third quarter of 2023 compared to 2022 resulted primarily from an increase in interest income due to rate increases. The increase in other net expense for the nine months ending September 30, 2023 compared to 2022 resulted primarily from the non-cash remeasurement of the contingent earnout liability associated with the 2021 merger with Alpha Healthcare Acquisition Corp. Net loss was $26.0 million for the third quarter of 2023 compared to $25.3 million for the third quarter of 2022. And net loss was $85.7 million for the nine months ended September 30, 2023 compared to $8.2 million for the nine months ended September 30, 2022."
9. SIGA Technologies Inc (NASDAQ:SIGA)
Average Analyst Price Estimate:$11
Upside Potential: 138%
Commercial-stage pharmaceutical company SIGA Technologies Inc (NASDAQ:SIGA) ranks ninth in our list of the best penny stocks with upside potential. According to data from Wall Street Journal, the stock's one-year price estimate is $11 while it was trading at $4.51 as of February 6.
Out of the 910 hedge funds tracked by Insider Monkey, nine hedge funds had stakes in SIGA Technologies Inc (NASDAQ:SIGA). The most notable stake in SIGA Technologies Inc (NASDAQ:SIGA)is owned by Touk Sinantha's AltraVue Capital which owns an $11 million stake in SIGA Technologies Inc (NASDAQ:SIGA).
8. Entravision Communications Corp (NYSE:EVC)
Average Analyst Price Estimate:$9.67
Upside Potential: 141%
Television and radio stations company Entravision Communications Corp (NYSE:EVC) ranks eighth in our list of the best little-known penny stocks with upside potential. It's also a dividend-paying stock, with a yield of over 5% as of February 6.
As of the end of the third quarter of 2023, 14 hedge funds tracked by Insider Monkey had stakes in Entravision Communications Corp (NYSE:EVC). The biggest stakeholder of Entravision Communications Corp (NYSE:EVC)during this period was Chuck Royce's Royce & Associates which owns a stake worth about $12 million in Entravision Communications Corp (NYSE:EVC).
7. Industrial Logistics Properties Trust (NASDAQ:ILPT)
Average Analyst Price Estimate:$10
Upside Potential: 158%
Massachusetts-based REIT Industrial Logistics Properties Trust (NASDAQ:ILPT) ranks seventh in our list of the best little-known penny stocks with upside potential. According to Yahoo Finance data, the stock's one-year average price estimate set by Wall Street analysts is $10, while it was trading at around $3.90 as of February 6.
As of the end of the third quarter of 2023, 16 hedge fund tracked by Insider Monkey had stakes in Industrial Logistics Properties Trust (NASDAQ:ILPT). The most significant stake in Industrial Logistics Properties Trust (NASDAQ:ILPT) belongs to Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management which owns a $6.8 million stake in Industrial Logistics Properties Trust (NASDAQ:ILPT).
6. Lanzatech Global Inc (NASDAQ:LNZA)
Average Analyst Price Estimate:$9
Upside Potential: 166%
Nature-based carbon refining company Lanzatech Global Inc (NASDAQ:LNZA) ranks sixth in our list of the best little-known penny stocks to buy with huge upside potential based on Wall Street analyst price targets. According to Yahoo Finance data the one-year average analyst price estimate for the stock is $9 while it was trading at around $3.83 as of February 6. Lanzatech Global Inc's (NASDAQ:LNZA) revenue in the third quarter increased by 143% on a year-over-year basis.
Out of the 910 hedge funds tracked by Insider Monkey, seven hedge funds had stakes in Lanzatech Global Inc (NASDAQ:LNZA).
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Disclosure.None.11Little-Known Penny Stocks With Massive Upside Potentialwas initially published on Insider Monkey.
