Are you ready to find some deals in the stock markets? The S&P 500 skyrocketed 7% yesterday, marking a strong trading session in what appears to be a true rally. Judging by the market charts, it looks like stocks bottomed out on March 23.
Bob Doll, chief equity strategist at Nuveen, noted, “The stock market will bottom before the economy does, The stock market may have bottomed at 2,192 on the S&P.”
It’s a situation that gives investors an incentive to buy. We’re not in a true bull market – not by a long shot – but the recent bear has pushed prices down and the current rally is opening up the prospects of gains. All that remains is finding the right stocks to buy.
And this brings us to penny stocks. After seeing heavy losses in March, investors are short of cash. Penny stocks are the natural fit; priced below $5, they offer an easy point of entry.
Sure, there could be a very good reason these tickers are so affordable, but should there be even minor share price appreciation, massive percentage gains could materialize, along with hefty profits for investors.
We’ve dipped into the TipRanks database, and found three penny stocks with Strong Buy consensus ratings and better than 50% upside potential over the next 12 months. Let’s take a closer look.
Zix Corporation (ZIXI)
We start in the tech sector, where Zix, a small-cap cybersecurity company specializes in providing safety for emails. Zix’s products allow data encryption and loss prevention for mobile applications. The company boasts over 20,000 customers, and a cloud app that is used by 30% of US banks.
ZIXI shares ended 2019 on a mixed note, but a solid product and strong yoy growth were the main story. Company earnings and revenue both missed the forecasts, although did better year-over-year. EPS, at 9 cents, matched the year-ago quarter, while the top line revenue of $50.4 million was significantly higher than 4Q18’s $18.5 million.
Zix’s product is popular, and that underlies the review by Northland Securities analyst Nehal Chokshi. He writes, “ZIXI already has ~22% market share. We view this as an ideal market share as it demonstrates the company has an established selling motion, but has significant opportunity to drive share gains within what should be a fast-growing market…”
Chokshi reiterates his Buy rating on the stock, and his $8 price target implies an impressive 100% upside potential. (To watch Chokshi’s track record, click here)
Craig-Hallum’s Chad Bennett agrees that Zix is a buying proposition. He specifically points out the company’s ability to withstand the current recessionary forces unleashed by the COVID-19 pandemic. Bennett says of the stock, “Ultimately, we believe the company can be resilient in a recessionary environment. Email and security are mission-critical to a business’s operations… ZIXI’s contracts are on one- to three-year terms, so assuming a two-year average contract length, only 1/8 of ZIXI’s customers are up for renewal each quarter. We believe that the ZIXI-side of the business will be resilient in the current environment…”
Bennett gives ZIXI shares a $9 price target, indicating a 125% upside, fully supporting his Buy rating. (To watch Bennett’s track record, click here)
All in all, Zix supports its Strong Buy analyst consensus rating with a unanimous 4 Buy reviews. Shares are priced low, at just $4.01, and the $10.25 average price target suggests room for a hefty 155% upside potential in the coming 12 months. (See Zix stock analysis on TipRanks)
Plug Power, Inc. (PLUG)
With our next stock, we move into the arena of reusable energy. Plug Power is a designer and manufacturer of hydrogen fuel cells, a technology with the potential to replace conventional batteries – giving it a certain allure in the alt-fuel automotive sector. The biggest advantage of hydrogen fuel cells over batteries is the ability to run at a constant power output, avoiding the power drop that batteries experience when their charge runs low.
Plug Power boasts an agreement with the USPS, and provides power cells for a fleet of electric mail delivery vehicles in Maryland. Earlier this year, Plug introduced a 125-kilowatt engine for trucks and off-road heavy-duty equipment.
Plug Power is on track to achieve its goal of $1 billion in revenue by 2024, and has provided guidance toward $300 million in billings for the current year. Plug boasts a heavy order load, and needs to meet a 90% order backlog, based on new orders from established customers.
In line with the company’s busy year ahead, H.C. Wainwright, analyst Amit Dayal put a Buy rating on the stock and raised his price target to $6.00 (from $4.00). His new target implies an upside of 63%. (To watch Dayal’s track record, click here)
Dayal commented: “We are updating our outlook for the company and have revised our estimates upwards. With respect to 2024 outlook, we remain relatively conservative in projecting net revenues of $759.0M vs. management’s goal of $1.0B in gross billings. In line with this, we have revised our operating expense estimates for 2020 to $84.2M, compared to $76.7M previously. With this level of topline execution, and higher insourcing of MEAs contributing to margin improvements, we believe the company should start demonstrating consistent EBITDA improvements over the next few years.”
Also bullish is 5-star Oppenheimer analyst Colin Rusch. Rusch sees Plug as an advancing technology, with a handle on the technical issues it needs to resolve, and says of the company, “We believe PLUG continues to progress on its technology roadmap, which targets 25% cost reduction, 50% increase in MEA durability, and 25% improved power density by 2023/2024. We believe these efforts will help expand its addressable market opportunity…” Rusch’s Buy rating, like Dayal’s, is backed by a $6 price target. (To watch Rusch’s track record, click here)
Overall, the hydrogen fuel-cell maker is without question a Wall Street favorite, considering TipRanks analytics indicate Plug Power as a Strong Buy. Out of 7 analysts tracked in the last 3 months, 6 are bullish on Plug stock while only 1 remains sidelined. With a return potential of 51%, the stock’s consensus target price stands at $5.57 (See Plug Power stock analysis on TipRanks)
Orbcomm, Inc. (ORBC)
Our final stock today, Orbcomm, is a wireless messaging company with a network of 31 satellites along with ground-based infrastructure. Customers can communicate, control, monitor, and track linked fixed and mobile assets worldwide. The company’s network is deeply connected to the Internet of Things and machine-to-machine niches, and Orbcomm boasts over 2 million billable subscribers. The service is available in 130 countries.
ORBC reported a loss of 3 cents per share in Q4, which actually beat the estimated 5-cent loss by 40%. Revenues, at $69.7 million, came in just under the forecast, but grew 5% year-over-year. Orbcomm had the bad timing to release this quarterly report just a week after the bottom fell out of the market in February; the stock has lost 50% so far this year, badly underperforming the overall markets.
That said, Orbcomm still presents investors with growing revenues – and now, a very low point of entry to the stock. In addition, many of ORBC’s customers are in the grocery sector, where accurate tracking of delivery vehicles is essential, giving the company a valuable niche in an essential sector – a clear advantage when much of the economy is shut down in an attempt to mitigate the spread of the coronavirus epidemic.
Michael Latimore, 4-star analyst with Northland Securities, notes another important factor in Orbcomm’s position — the company’s solid foundation of parts and supplies. Latimore writes, “ORBC has enough inventory to last four months. Most of its manufacturing is done in Mexico and Germany. These plants could shut down for 1-3 months, but so far so good. China seems to be getting back to work, which helps with standard components like wired cables.”
Latimore sets a $6 price target on this stock, implying a fantastic upside of 185%, and gives ORBC a Buy rating. (To watch Latimore’s track record, click here)
Overall, a unanimous 3 Buy ratings give Orbcomm a Strong Buy from the analyst consensus. The stock has an average price target of $7.17, which suggests a massive 241% potential upside from the current share price of just $2.10. (See Orbcomm stock analysis on TipRanks)