Penny stocks, priced under $5 a share, often carry a reputation as high-risk, high-reward investments. These stocks can offer exceptional upside for those willing to navigate the volatility and limited coverage. Their appeal lies in their potential for explosive growth, though investors must balance this with liquidity risks and speculative swings.
Among notable players in this arena are Compugen Ltd. (CGEN), a trailblazer in computational drug discovery; WM Technology, Inc. (MAPS), a digital platform serving the cannabis sector; and New Gold Inc. (NGD), focused on gold mining and exploration. Despite their niche, speculative industries – biotech, cannabis, and precious metals – all three are rated "Buy" by analysts with decent upside potential to the mean price targets.
Despite limited analyst coverage, these stocks have each staged an impressive rally in 2024, outperforming the broader indices like the S&P 500 Index ($SPX). Let's dive deeper.
Penny Stock #1: Compugen
Founded in 1993, Compugen is a trailblazer in cancer immunotherapy. Based in Israel, this clinical-stage biotech firm has redefined drug discovery with Compass, an artificial intelligence (AI)-powered platform that unlocks new drug targets and biological pathways.
Over the past 52 weeks, CGEN stock has rallied 108%, and has risen nearly 4% over the past five days.
CGEN is currently priced at 4.21 times sales, trading at a discount to its sector peers and historical average.
On Nov. 12, Compugen reported its fiscal Q3 2024 earnings, generating revenues of $17.1 million, with net profit coming in at $1.3 million. While EPS landed at $0.01, just below expectations, it marked a significant turnaround from the $0.11 loss per share recorded a year prior.
In Q3, a pivotal $30 million milestone payment from Gilead (GILD), tied to FDA IND clearance for COM503, highlighted Compugen's robust partnership. Encouraging data from trials of COM701, COM902, and pembrolizumab showcased durable responses in platinum-resistant ovarian cancer.
With $113.2 million in cash reserves, expected to fund operations into 2027, Compugen’s financial stability is solid. Plans for a Q2 2025 trial targeting relapsed platinum-sensitive ovarian cancer signal potential regulatory and commercial breakthroughs. Furthermore, royalties from AstraZeneca’s (AZN) bispecific antibody development promise a lucrative future, reinforcing Compugen’s position as a leader in cutting-edge cancer immunotherapy.
Analysts tracking the company anticipate its profit to surge 152.4% year over year to $0.11 per share.
CGEN has a unanimous “Strong Buy” rating from all three analysts covering the stock. The average analyst price target for Compugen is $5.00, indicating potential upside of 206.7%. The Street-high target price of $7.00 suggests this penny stock could rally as much as 329.4%.
Penny Stock #2: WM Technology
WM Technology, founded in 2008 and based in Irvine, California, powers the cannabis ecosystem with innovative e-commerce and compliance software.
Its Weedmaps marketplace connects users to local cannabis products and educational resources, while subscription-based tools like WM Listings, WM Orders, and WM Insights streamline operations for retailers and brands. With solutions spanning advertising, inventory management, and analytics, WM Technology drives growth in the cannabis industry across the U.S. and internationally.
Valued at a market cap of $206.4 million, this cannabis penny stock rose 88% in 2024, skyrocketing 84% over the past month alone and hitting its 52-week high of $1.4899 just the last week.
WM Technology stock, priced at 1.14 times sales, trades below the sector average.
MAPS stock soared over 35% over the subsequent trading sessions after its Q3 earnings release after the market close on Nov. 12. The company posted $46.6 million in revenue, beating not just its own guidance but also Wall Street's estimates.
With $45 million in cash and zero debt, WM Technology showcases financial muscle and strategic finesse. Streamlined operations cut GAAP expenses by 21%, fueling marketplace expansion. Average monthly paying clients rose to 5,100, with average monthly revenue per client increasing to $3,043, up from $2,874 last year. This growth reflects the impact of sunsetting lower-spending products in late 2023, paving the way for higher-value clients.
For fiscal Q4, management projects net revenues to be approximately $46 million, while adjusted EBITDA is estimated to be roughly $7 million.
MAPS earned a “Strong Buy” rating from its sole analyst covering the stock. WestPark Capital set a price target of $2.61, and if that projection holds, MAPS could surge by an impressive 92%, making it a stock to watch for investors eyeing high returns.
Penny Stock #3: New Gold
With a market cap of $2.3 billion, New Gold is a mid-tier player in the mining world, bridging the gap between junior explorers and senior mining giants. Based in Canada, New Gold operates with precision and focus, boasting two flagship assets: the Rainy River gold mine and the New Afton copper-gold mine. These sites are more than just mines – they are the backbone of New Gold's position as a steady force in the intermediate mining category.
Fueled by gold's (GCG25) rally, NGD stock soared 124% in a year, with a 54% surge in just six months, riding the market’s golden wave.
From a valuation standpoint, NGD stock is currently priced at 15.89 times forward earnings, a discount compared to its peers and its historical average.
The company reported robust Q3 earnings results on Oct. 29 after the bell, showcasing record-breaking free cash flow and razor-sharp cost management. Revenue soared to a quarterly high of $252 million, a 25.2% year-over-year, narrowly surpassing expectations. The real shine came from adjusted EPS, which skyrocketed 166.7% annually to hit $0.08 - twice what Wall Street had anticipated.
New Gold reported Q3 production of 78,369 ounces of gold and 12.6 million pounds of copper at all-in sustaining costs of $1,195 per gold ounce (by-product basis). Rainy River led with 61,892 ounces of gold despite a temporary suspension in July, while New Afton delivered 16,477 ounces of gold and hit milestones ahead of schedule. Strong cost control and higher metal prices fueled a record $128 million cash flow and $57 million FCF, highlighting operational efficiency.
New Gold’s fiscal 2024 outlook reflects disciplined execution and efficiency. Gold production is revised to 300,000 to 310,000 ounces range, with New Afton hitting the top of its range and Rainy River slightly lowered. Copper output is steady at mid-range. Cash costs remain aligned, while all-in sustaining costs lean towards the lower end, thanks to operational improvements and cost reductions.
Analysts project New Gold's fiscal 2024 EPS to surge 157.1% year over year to $0.18 and grow by another 44.4% to $0.26.
NGD stock has a consensus “Moderate Buy” rating overall. Among the nine analysts covering the stock, five suggest a “Strong Buy,” one advises a “Moderate Buy,” two recommend a “Hold,” and the remaining one advises a “Moderate Sell.”
The average analyst price target of $3.21 indicates 10.7% potential upside from the current price levels, while the Street-high price target of $3.77 suggests that the NGD could rally as much as 30% from here.
