Penny stocks have carved out a niche as an enticing choice for investors open to high-risk, high-reward ventures. With share prices under $5, these low-priced stocks present an opportunity for significant gains. They also carry the inherent risk of considerable losses. In this article, we explore penny stocks priced under $1. We’ll discuss their unique characteristics, their appeal, and the balance of risks and rewards.
A Closer Look at Penny Stocks
Penny stocks consist of shares in smaller, often under-the-radar companies trading at relatively low prices per share, typically below $5. Due to size and limited liquidity, cheap stocks can undergo extreme price swings. That makes them a high-risk, high-reward proposition.
Reasons for Trading Penny Stocks
Several factors attract investors to penny stocks:
- Potential for substantial returns: The low share prices of inexpensive stocks mean that even a slight price increase can lead to sizable gains. For instance, a stock priced at $0.50 per share could double in value with just a 50-cent increase, generating a 100% return on investment.
- Affordability: As penny stocks trade at lower prices, they offer a budget-friendly entry point for novice investors or those with limited funds.
- Portfolio diversification: Including low-priced stocks in an investment portfolio can help spread risk across various assets and market sectors.
Examining Penny Stocks Under $1
Penny stocks under $1 represent a distinct category of low-priced stock. They often capture the attention of investors seeking undiscovered opportunities. These stocks typically belong to up-and-coming companies or those operating in niche markets. While the prospect of pinpointing the next major success story can be alluring, it’s crucial to approach these investments cautiously, conducting comprehensive research and due diligence to minimize risks.
Navigating Challenges and Opportunities
Investing in penny stocks, particularly those under $1, entails certain obstacles. Critical risks to consider include:
- Low liquidity: These stocks often display limited trading volumes, making it challenging for investors to enter or exit trades at favorable prices.
- Vulnerability to manipulation: Owing to their lower liquidity and limited market exposure, stocks below $5 can be manipulated by unscrupulous traders. This can lead to significant losses for investors who aren’t careful.
- Inexperience and limited resources: Companies associated with penny stocks often have restricted financial resources or an unproven track record, making it difficult to evaluate their long-term prospects.
Despite these challenges, the potential rewards of carefully chosen and well-researched penny stocks under $1 can be considerable. For investors with a high-risk tolerance and committed to thorough research, venturing into low-priced stocks may provide an exciting and potentially lucrative investment journey. Today we look at 3 penny stocks to watch in the stock market today that are gaining momentum.
Penny Stocks To Watch
VirnetX HoldingCorp. (VHC)
One of the initial catalysts that sent this penny stock higher toward the end of Q1 was news of a special dividend of $1 per share for shareholders of record on April 10th.
Something else that may have gotten some renewed interest is the company’s deal with WeSecure. The two entered a partnership where WeSecure will sell VirnetX cybersecurity products in the US, Canada, and the Middle East. With more people using AI, cybersecurity is coming into focus. The Harvard Business Review published an article titled “The New Risks ChatGPT Poses to Cybersecurity.”
In it, the author discussed how “manipulation of ChatGPT is certainly possible, and with enough creative poking and prodding, bad actors may be able to trick the AI into generating hacking code. In fact, hackers are already scheming to this end.”
Against this backdrop, some cybersecurity stocks have popped in the stock market today, including VHC stock.
Aeglea Biotherapeutics (AGLE)
When it comes to penny stocks under $1, there are plenty of potential catalysts to account for. Low floats, insider trading, unusual options activity, social sentiment, and sometimes it’s just the price, in general. That’s because speculation tends to build around stocks that have been beaten up due to either bad news, negative sentiment, or both.
In this case, Aeglea ran into trouble when it reported interim results from a Phase 1/2 trial of its pegtarviliase in treating homocystinuria. Due to negative results, the company is not on the path of reviewing strategic alternatives. These alternatives include a potential acquisition, merger, reverse merger, sale of assets, and even possible business combinations.
“Our other clinical program, pegzilarginase for the treatment of patients with Arginase 1 Deficiency which is partnered in Europe and certain countries in the Middle East with Immedica Pharma AB, currently has a Marketing Authorization Application under review with the European Medicines Agency with a potential decision on approval in late 2023,” said Cortney Caudill, chief product officer.
The market may have already begun speculating on what the potential alternatives may be for Aeglea. Shares of AGLE stock managed to rebound by roughly 5% since Thursday’s closing bell.
Astra Space Inc. (ASTR)
Like Aeglea, Astra has come under fire after mixed reactions from recent updates. In particular, shares tested new 52-week lows earlier this month after Virgin Orbit filed for bankruptcy and the company reported its latest earnings results.
The Virgin Orbit event sent a shockwave across space stocks, leaving more questions than answers. Meanwhile, Astra’s lackluster results shed a more negative light on the company’s performance during 2022.
“Our team has been intensely focused on execution. In addition to gaining significant traction in our Space Products business, we achieved critical milestones in the development of Launch System 2, including conducting the first full flight duration run of our first stage engine and substantial progress toward completion of the Rocket 4 production line,” said Chris Kemp, Astra Founder, Chairman, and CEO in a March business update.
Kemp also discussed how the company anticipates a ramp-up in production beginning in Q2 2023. Since we’re at the beginning of the timeframe, some expect Astra to start implementing initiatives. This week, they may have gotten a bit of reprieve following a new update involving the newly established US Space Force. Astra was awarded a new launch order. The company said the task order, valued at $11.45 million, is for a launch of an ESPA-class space vehicle and additional cubesats.