3 Penny Stocks To Buy According To Wall Street Analysts
It’s May, and penny stocks are back on the menu to kick things off. But, if you’re new to trading, you may have a few questions before deciding what to buy. First, what are penny stocks? How do you find them and should you buy them? In this article, I’ll go over some of these basics and look at a few of the best penny stocks to buy right now, according to some of Wall Street’s top analysts.
What Are Penny Stocks?
According to the Securities and Exchange Commission, penny stocks are shares of companies trading for less than $5. I know that some traders will have their own definition for these cheap stocks. But, as a general rule of thumb, this $5 threshold seems to have remained a constant.
How Do You Find Penny Stocks Buy?
Finding penny stocks to buy is easier said than done. It may seem as easy as scanning for stocks under $5. But there’s a lot more that should go into it than just basing it on price alone. First, is there any volume in a stock? This is the lifeblood for any public company. Without volume and liquidity, it’s hard to quickly & easily buy and sell. For example, if a certain penny stock only trades a few shares per day, not only can’t you establish a meaningful position, if you do, it will be tough to exit that position at an optimal price due to lack of liquidity.
Next, are there any market trends that could contribute to or take away from a bullish move in the stock? You might’ve found the best company “on paper,” but if it’s in an industry getting beaten up, then it could be like rolling a boulder up a hill. In 2020, certain sectors flourished, and certain ones completely failed thanks to the pandemic. Buying into stocks that were part of the failing industries made it more difficult to make money in the shorter term than stocks in the industries that flourished.
Depending on how long you plan on staying in the trade, fundamentals can play a role. These are things that deal with the business side of a stock; the actual company. How are its financials, what is driving growth, has management outlined a clear path to profitability; these are just a few questions to have answers for. Especially when it comes to investing in penny stocks, fundamentals should play a role in your decision-making process.
Should You Buy Penny Stocks?
Are penny stocks worth it, and should you buy them? Obviously, we’re talking about higher-risk assets here. Even with the “highest-priced” penny stocks – trading right at $4.99 – the smallest 50 cent move can equate to a meaningful gain. The cheaper the stock is, the higher the volatility usually is. So when it comes to deciding whether to buy penny stocks, knowing your risk tolerance is important.
Can you remain calm during a brief 20% decline in value? I’m not saying that all penny stocks will drop like this or that you should hold onto a 20% loser. But, if certain technical levels remain intact and a stock hasn’t broken any major supports levels, that brief pull-back could be the precursor to the next 100%+ move in the market.
Take, for instance, one of the penny stocks we discussed very early on in April. Brooklyn ImmunoTherapeutics Inc. (NYSE: BTX) was a cancer treatment company we introduced on April 6th (See: 4 Hot Penny Stocks To Watch This Week After Strong Jobs Report). At the time, BTX stock was trading around $4.70. Shares gapped up that day to $8.35 at the opening bell. In the days to follow, the penny stock would pull back to lows of $4.86.
While this wasn’t a massive change in price from where we first started following the stock ($4.70 to $4.86), it was a very volatile trade. We’re talking about a drop in price of over 40% from high to low. But here’s where things like technical analysis come into play. If you look at the BTX stock chart, you’ll see that the trend held support at its 200-day moving average. Seeing this, experienced traders likely saw a potential opportunity and put it on their watch lists.
Meanwhile, the company itself was going through some major fundamental changes. Fast-forward a few weeks, and BTX just reached highs of $78.88 during after-hours trading on April 30th. Knowing how to trade penny stocks played a huge role in this instance. Not jumping right into the move, waiting for proper entry points, having patience, knowing technical levels, and taking account of fundamental developments all had a hand in this.
Penny Stocks To Buy Right Now [According To Analysts]
BTX has become one of the hottest penny stocks to watch in Q2. Obviously, not all cheap stocks go on to break out like this. But it does show the potential that these types of stocks have. There aren’t many other types of assets that will climb 1,578% in just a few weeks. But are these high-flying stocks something that top names on Wall Street actually take seriously, or are they only for the high-risk, retail traders spending time on places like Reddit and Twitter all day?
Believe it or not, hundreds of smaller companies gain attention from analysts. Some have even garnered strong ratings and lofty price targets. Many of these companies won’t reach the true potential of analyst expectations. But this is one of the reasons why ratings alone won’t be the only thing to rely on when putting together a list of penny stocks to buy. However, additional insight from these firms doesn’t hurt either. With that in mind, here are a few trending names that analysts have grown bullish on.
Penny Stocks To Buy [According to Chardan Capital]: Sonnet Biotherapeutics (NASDAQ: SONN)
Chardan Capital is the most recent firm to weigh in on Sonnet Biotherapeutics. While the rating was made several months ago, the price of SONN stock is the same right now as it was when the firm gave its rating. Chardan has a Buy on Sonnet and a price target 237% higher than the closing price on April 30th.
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According to the firm’s Keay Nakae, “The company’s positive preclinical data for lead asset, SON-1010, in a humanized mouse model provides more evidence that its FHAB design can deliver a cytokine with an effective therapeutic window without systemic toxicity.”
SON-1010 is Sonnet’s therapeutic candidate configured using its Fully Human Albumin Binding platform referenced by the analyst. This “FHAB” targets tumor tissue and has received Notice of Allowance from the USPTO for its first issued patent on the delivery technology. According to Sonnet, formal issuance is expected during the first half of the year. In addition to this potential milestone, a recent business update showed the company is also waiting on data to prepare an IND submission for SON-101. Sonnet has also begun work to initiate clinical trials during the second half of 2021.
Penny Stocks To Buy [According to Cantor Fitzgerald]: Lineage Cell Therapeutics, Inc. (NYSE: LCTX)
Penny stocks don’t have to climb $50 or more to record significant gains as BTX did. Sometimes it might only be a matter of a few dollars that does the trick. Take, for instance, Lineage Cell Therapeutics. Last year, shares of LCTX stock traded as low as $0.73. In 2021, the penny stock reached highs of $3.13. Though it wasn’t a 15x move, we’re still talking about a stock that jumped nearly 330% within a matter of a few months. Interestingly, even in light of this move, analysts at Cantor Fitzgerald still expect more upside based on the $6 price target.
Analyst Kristen Kluska explained in a note that, “In our view, the company has demonstrated transformational benefits across the two lead programs, which we believe could each equate to more than $1-billion in peak sales. Lineage has guided for many data and execution events over the next 12 months, which we believe could drive further upside.”
Kluska expressed interest in the company’s OpRegen, which is in a Phase 1/2a trial in 24 patients. So far, of the patients in Cohort 4 with impaired vision, 9-of-12, or 75%, of transplanted eyes experienced “steady or increased best corrected visual acuity.”
This week could be an important one for LCTX. Updated interim results from a Phase 1/2a study of OpRegen® will be presented at the 2021 Association for Research in Vision and Ophthalmology Annual Meeting (ARVO 2021). The presentation itself will be part of the “Stem cells/Gene Therapy/Transplantation Session” on May 6th.
Penny Stocks To Buy [According to Deutsche Bank]: Ashford Hospitality Trust (NYSE: AHT)
Plenty of penny stocks have analyst coverage from 1 or two firms from time to time. However, there are other companies which have gained interest from more than just a handful of banks and brokerages. Ashford Hospitality is one of them. The last few quarters have seen shifts in price targets from a number of Wall Street firms including Deutsche Bank. The firm has a Buy on the stock along with a $6 target. While this in itself seems bullish, other firms still remain cautious and I’ll explain a little bit more as to why this might be.
Ashford is one of the reopening penny stocks. The company is a real estate investment trust (REIT) focused on investing mainly in upper upscale, full-service hotels. Obviously, with the pandemic hitting travel and leisure stocks hard last year, AHT wasn’t immune to this drop. Shares fell from over $25 at the beginning of the year to as low as $1.27 by October. Since then, vaccine distribution and reopening based on strong economics have helped give sector stocks a boost.
AHT shares have bounced back by more than 100% so far, and some analysts like Deutsche expect this move to continue. While the Bank has a Buy on the hotel stock, other analysts are more cautious. B. Riley weighed in on its outlook for Ashford. While it increased its $2.50 price target to $3, it currently maintains a Neutral rating on the stock.
Similar to Lineage, this week could be an important one for Ashford as well. The company is set to release operating results from the first quarter, on May 4th.
Are Penny Stocks Worth It?
No matter what analysts say or what message boards suggest, penny stocks are high risk. Understanding how to navigate things like volatility are important to making money from big moves in cheap stocks. News, rumors, and even general market sentiment play their part. Determining if penny stocks are worth it starts with you. So if you’re brand new to this world of stocks under $5, before you head over to see what Reddit has to say, start learning how to trade, first. Here are a few articles to get you started:
- Are Penny Stocks A Good Investment In 2021?
- Penny Stocks, How To Trade Them & Make Money In 2021
- Best Penny Stock Brokers For Trading & Investing In 2021
- Penny Stocks & Frequently Asked Questions From New Traders