In the currently volatile economic environment, stocks are cropping up in my radar that look set to take off. Below, you’ll find some of the most intriguing dirt-cheap but high-potential penny stocks I’m following.
Some of the set-ups I describe below may no longer be relevant or intact as of the time you read this article. Please conduct your own due diligence. Many stocks mentioned here were also discussed in the Peter Leeds Newsletter. Peter may own shares in some of the investments mentioned, in which case that fact will be clearly indicated. Please note that penny stocks are notoriously volatile.
First, Some Updates
Entravision Communications Corporation (EVC)
Leader in Spanish-language programming Entravision Communications Corporation (EVC) is having an excellent year, rising 40% since I introduced it to Investopedia readers last month and leaving behind its penny stock status – at least, for now.
It seems that the market is finally catching up to the company’s impressive turnaround, with excellent sales figures and a very healthy P/E ratio of 14.55 suggesting that the stock is good value for money. I wouldn’t be surprised if we now saw Entravision stock taking a break from its climb, on the back – yet again – of investors taking profits (see Zovio and AmpliTech below). I am also concerned about the high debt/equity ratio here, as well as a relative strength index (RSI) that suggests the stock is overbought.
So, in the short term, I believe that Entravision shares will drop from their current highs. As for the longer term, I would be surprised if Entravision stock ultimately went much higher than $7. There just does not seem to be enough exciting news here to justify a stronger valuation than that.
Zovio Inc. (ZVO)
I’ve listed online education provider Zovio Inc. (ZVO) here a number of times. That’s because there’s usually something interesting going on with the stock, which ascended to $7 per share earlier this year. Unfortunately, Zovio stock has trouble holding onto higher prices – most recently due to flagging sales and weak guidance.
Still, as I maintained last month, Zovio may have enough firepower behind it, especially via its coding bootcamps and strong financial ratios, to ascend the charts once again. In fact, Zovio stock is up 22% since I revisited it at the end of May.
I think it’s likely that, following a period of shareholders taking gains, Zovio shares will eventually climb back up to $3.50 and above. The question is when that’s going to happen, as the company obviously needs to start reporting more significant contract wins before it will win over more investors.
Consequently, I would only keep holding onto this one if you consider yourself a patient investor. For those readers who are willing to (potentially) wait, however, this could be an interesting stock to explore.
AmpliTech Group, Inc. (AMPG)
I introduced 5G play AmpliTech Group, Inc. (AMPG) to this column last month, after which it quite quickly rose approximately 30% by the middle of the month. A pullback ensued, which wasn’t particularly surprising – more recent investors (or simply impatient ones willing to take a loss) were just taking their short-term profits, in my view.
Nonetheless, AmpliTech is reporting more and more deals, a testament to its strong potential, in my view. Admittedly, these contracts seem fairly small … and that’s why it’s still a penny stock.
That said, the financials are not looking that great here, so this is pretty much entirely a play on the so-called “5G Revolution” and whether you think the stock deserves some of the hype it’s getting. For my part, I’m still cautiously bullish on many of the industries in which ApliTech operates (including defense, Internet of Things, satellite technology, and space exploration), so I’ll be holding onto the stock for now.
Some New Ones
Creative Realities, Inc. (CREX)
Creative Realities, Inc. (CREX) creates digital advertising solutions for companies all over North America. I’m mostly interested in it right now because of a comment CEO Rick Mills made in the most recent conference call: “I want to take a moment and talk about an important pending contract, which we first discussed on the prior earnings call. […] Once launched, this contract is expected to deliver an additional $6 million in revenue for each quarter for four to six consecutive quarters. As we stated on our prior call, these results are contingent upon getting the contract executed and the decision by the customer to launch. We currently believe this contract will begin fulfillment in Q3, and we will keep you updated. Due to the supply constraints, we anticipate a slower initial rollout of the contract.”
Consider that sales over the past two quarters tallied up to $4.99 million and $5 million, respectively. This means that, once the contract is finally put in place, revenue may more than double every quarter for four to six consecutive quarters, provided other sales remain at roughly the same level. That’s a whole lot of upside potential right there.
Now, it’s clear that this paycheck is still highly speculative and contingent on a number of factors. (Make sure to do your due diligence on the industry-wide semiconductor supply constraints.) But the risk may already be baked into the stock, which is currently trading at only around $2.23 per share.
Furthermore, three consecutive quarters of positive EBITDA signal that the company is getting back on track as the nation slowly starts to recover from the pandemic and its effects. With a growing order book, more cash for growth, and some very interesting high-profile deals on the docket, Creative Realities share prices could be poised to grow 50% to 75% from here, in my view. Let’s hope that management is able to keep pushing the momentum forward.
Ceragon Networks Ltd. (CRNT)
I’ve been feeling pretty positive about 5G plays lately. (See also AmpliTech.) Raging inflation, pandemics, global political disaster – none of these can stem the inevitably rising tide of the 5G takeover, in my view. In fact, in the eyes of many, it’s already upon us.
Ceragon Networks Ltd. (CRNT) “provides wireless backhaul solutions that enable cellular operators and other wireless service providers to deliver voice and data services,” according to the company bio. It first came to my attention in February 2020, when it was trading at only $2.08 per share.
It has since met and even exceeded my short-term and long-term sell opinions, revealing the growing acceptance (and desirability) of 5G. And I believe that Ceragon stock still has a lot of upside ahead of it, especially given that it pulled back around 15% over the past quarter.
Notably, CEO Ira Palti said the bookings with Tier 1 and Tier 2 operators are growing significantly, and indeed, in the first quarter of 2021, revenues were up 22%, while EPS leaped up 83% quarter over quarter. The balance sheet isn’t exceptionally strong, but it’s decent (with total assets of $272 million versus total liabilities of $126.29 million as of the most recent quarter).
Institutional ownership is up 26% over the quarter, which is a bullish signal indicating that hedge funds, mutual funds, and other investing pros are taking an interest in the stock. What is really driving my enthusiasm for Ceragon is the growth industry in which it is operating. Other financial media outlets are touting 5G-related stocks priced at $80-plus per share – and Apple Inc. (AAPL), what a shocker.
But I believe that there are opportunities for penny stock investors to get involved too … and for those of you who are willing to accept the added risk and volatility that come with every low-priced equity, Ceragon stock may be a winner. One note of warning: there are hints that 5G stocks could be the next mania … so don’t get greedy, and make sure to move quickly!
Best Brokers for Penny Stocks
Interactive Brokers’ very low per-share trading commission of $.005 ($1 minimum per trade) and up-to-the-split-second real-time margin calculations are ideal for penny stock traders. IBKR Lite clients can trade penny stocks for $0.
Low commissions, maximum 1% of trade value for IBKR Pro, $0 for IBKR Lite
Streaming real-time data, including account information
IBot, IB’s AI-powered online assistant, can help find features
Data streams on only one device at a time
Traders Workstation a steep learning curve
IBKR Pro customers charged fees to trade, though they are low
Schwab’s research pages point out the exchange on which a stock trades, which will keep you informed of the inherent risk. There are a variety of platforms available; the StreetSmart platforms have customizable charting and streaming real-time quotes. Schwab does not charge trading commissions on all stocks (including penny stocks) and ETFs.
Excellent screeners available on StreetSmart Edge
Free access to a wide array of news feeds
Strong customization and personalization options on StreetSmart Edge
The sheer number of features and reports available sometimes overwhelming
Transaction history for just 24 months online
Uninvested cash not swept into a money market fund
Penny stocks are volatile and can generate catastrophic losses. Price levels in this article are hypothetical and do not represent buy recommendations or investment advice. Keep in mind that it’s your responsibility to make trading decisions through your own skilled analysis and risk management.
Peter Leeds is the author of several books, including the international bestseller, “Penny Stocks for Dummies.” He and his team also issue a newsletter devoted exclusively to penny stock picks and analysis, as well as a popular YouTube channel PeterLeedsPennyStocks.