The Nasdaq is one of the top three most-followed stock market indices in the United States, comprising over 2,500 stocks. Its composition is heavily skewed towards the Technology sector, and as of February 10, 2025, the technology sector constituted around 60% of the index’s weight. Consumer Discretionary follows as the second-largest sector, accounting for approximately 20% of the weight. Given this substantial weighting, the Nasdaq is commonly regarded as a leading indicator of the performance of the IT industry.
While the Nasdaq includes tech giants with the largest market capitalizations, it also presents opportunities to invest in stocks often referred to as “penny stocks.” These stocks, priced under $5, offer significant growth potential for investors seeking high returns at a relatively low capital outlay. Although these stocks come with high return and diversification opportunities, they also carry higher risks due to their smaller market capitalization, relatively higher debt, and greater volatility in share prices.
To provide a perspective on the small-cap investing landscape, we refer to recent insights from Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners. In November 2024, during an interview with Yahoo Finance, Gannon discussed his thesis on small-caps. He noted that small-caps had been out of favour for an extended period, with the Russell 2000 reaching its peak three years ago and experiencing negative returns since then. Gannon believes the new Trump administration, reshoring efforts, leading innovation, and a favourable earnings season will significantly boost small-cap companies, describing this shift as nothing short of a “revolution.”
As a result, exciting return opportunities are anticipated in the small-cap space in the coming years. When reviewing stocks priced under $5, investors should carefully select emerging companies with innovative business models or disruptive technologies, and those that have the potential to deliver exponential growth as they capture market share, develop new products, or enter new markets.
On that note, we have compiled a list of the 10 best Nasdaq stocks under $5 to buy. Let’s explore these opportunities.
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Our Methodology
To identify the 10 best Nasdaq stocks under $5 to buy, we screened Nasdaq-listed companies with a market price below $5. We selected the 10 companies that were the most widely held by hedge funds and ranked them in ascending order of hedge fund holders, as of Q3 2024.
Note: All pricing data is as of market close on February 10.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best NASDAQ Stocks Under $5 to Buy
10. Arbutus Biopharma Corp. (NASDAQ:ABUS)
Current Market Price: $3.33
Number of hedge funds: 16
Arbutus Biopharma Corp. (NASDAQ:ABUS) is a clinical-stage biopharmaceutical company focused on developing innovative therapies for patients with chronic hepatitis B virus (HBV) infection. The company’s proprietary drug product candidates aim to address the limitations of current HBV treatments by targeting multiple stages of the viral lifecycle. Arbutus has a robust pipeline, including its lead compound Imdusiran (AB-729), an RNA interference therapeutic designed to reduce HBV surface antigen levels and reawaken the HBV-specific immune response.
On January 13, the company provided important Corporate and Financial updates that were highly positive towards its investment case. They highlighted three key aspects:
Firstly, Arbutus Biopharma Corp. (NASDAQ:ABUS) disclosed its plan to initiate a Phase 2b clinical trial combining imdusiran, interferon, and NA therapy in the first half of 2025. At the American Association for the Study of Liver Diseases (AASLD) – The Liver Meeting in November 2024, the company presented new data from its IM-PROVE I Phase 2a clinical trial, supporting its belief that imdusiran is differentiated from other RNAi therapeutics in development for HBV. With this success, the company is moving forward with the Phase 2b trial.
Secondly, the company has ongoing lawsuits against Pfizer/BioNTech and Moderna for their use of Arbutus’s patented lipid nanoparticle (LNP) technology in their COVID-19 vaccines. In the first case, the court is expected to provide its ruling in the first half of 2025, and for the latter, the trial date has been scheduled for September 24, 2025.
Thirdly, Arbutus Biopharma Corp. (NASDAQ:ABUS) expects to significantly reduce its net cash burn in 2025 to a range of $47 to $50 million, compared to a 2024 net cash burn of approximately $65 million. Additionally, the current cash position is sufficient to fund operations through the first quarter of 2028, indicating a stronger financial position that should support the company’s ongoing and upcoming projects.
9. EVgo Inc. (NASDAQ:EVGO)
Current Market Price: $2.92
Number of hedge funds: 17
EVgo Inc. (NASDAQ:EVGO) is an electric vehicle (EV) charging network in the United States, providing fast charging solutions for EV drivers. The company operates an extensive network of public charging stations, focusing on urban areas and high-traffic locations. EVgo is building and operating the necessary infrastructure and tools to accelerate the mass adoption of EVs for individual drivers, rideshare and commercial fleets, and businesses.
In December 2024, EVgo Inc. (NASDAQ:EVGO) achieved a significant milestone by securing a $1.25 billion guaranteed loan facility from the U.S. Department of Energy (DOE). This funding is aimed at supporting the company’s future efforts to construct 7,500 new fast charging stalls nationwide. With this expansion, EVgo’s total owned and operated network is expected to reach at least 10,000 fast charging stalls, effectively tripling its network footprint by 2029 and providing a substantial competitive advantage.
JP Morgan has recently reiterated EVgo Inc. (NASDAQ:EVGO) as its top pick in the Clean Energy sector. While the analyst acknowledges that the Trump administration may de-prioritize clean energy, there remains potential for further support due to considerations of energy independence and protectionism against China. The analyst believes that negative sentiment on the stock is overblown, noting that EVgo’s business model is well-positioned for growth. He expects investors to adopt a more positive outlook on the stock as 2025 progresses.
8. Absci Corp. (NASDAQ:ABSI)
Current Market Price: $4.33
Number of hedge funds: 20
Absci Corp. (NASDAQ:ABSI) is a biotechnology company that leverages AI and lab technology to create better drugs for patients more rapidly. It utilizes data to train its AI, which helps design new drugs that are then tested in the lab. The company’s goal is to produce high-quality, effective drugs through its unique Integrated Drug Creation platform.
Absci Corp. (NASDAQ:ABSI) is a consensus Buy, with all analysts covering the stock assigning a Buy rating and projecting an average 85% upside potential. On January 22, analyst from Needham initiated coverage on the company with a Buy rating and a $9 price target. He based his positive case on the view that the company stands out from the competition due to its practical approach to drug development. The analyst also believes the company has “potential best-in-class assets in high-value therapeutic areas” and employs a business strategy focused on creating and monetizing early-stage value.
By combining AI with scalable lab technology, Absci Corp. (NASDAQ:ABSI) can develop novel biologics, including antibodies and other protein therapeutics, aimed at addressing unmet medical needs. Their hands-on approach allows them to innovate efficiently and effectively in the biotechnology space, which should support significant growth and value creation.
7. Talkspace Inc. (NASDAQ:TALK)
Current Market Price: $4.10
Number of hedge funds: 20
Talkspace Inc. (NASDAQ:TALK) is a behavioral telehealth company that provides online therapy and mental health services through its digital platform. The company connects users with a fully-credentialed network of licensed therapists, psychologists, and psychiatrists via text, audio, and video messaging, making mental health care more accessible and convenient. Talkspace aims to reduce the stigma associated with seeking mental health support and improve overall mental wellness.
At the JP Morgan Healthcare Conference held in January 2025, the company stated that the behavioral health market is massive and severely underserved, with an estimated addressable market of around $66 billion across various customer segments. In early December 2024, Mizuho and KeyBanc initiated coverage on Talkspace Inc. (NASDAQ:TALK) with an Outperform and Overweight rating and price targets of $5 and $4.5, respectively. According to the KeyBanc analyst, sales growth of 20%-25% is anticipated, primarily driven by further expansion into payor networks and continued margin expansion from scale and operating leverage. The analyst highlights that the company’s transition from consumer cash pay to a business-to-business model is a crucial element of its strategy. The company’s acceptance of insurance not only enhances patient retention but also reduces customer acquisition costs, leading to decreased volatility and expanding margins.
6. Conduent Inc. (NASDAQ:CNDT)
Current Market Price: $4.32
Number of hedge funds: 20
Conduent Inc. (NASDAQ:CNDT) offers business process services (BPS; outsourcing) and technology solutions to help businesses and government agencies manage critical tasks and interactions. The company provides a range of services, including customer experience management, digital payments, government healthcare claims, road usage charging, and transit. Conduent uses automation, cloud computing, and AI to deliver these mission-critical business process solutions.
Conduent Inc. (NASDAQ:CNDT) announced its mid-term outlook with its Q3 2024 results in November. The company expects adjusted revenue between $3.19 billion and $3.22 billion and an adjusted EBITDA margin between 3.75% and 4.0% for the full year 2024. Additionally, it has forecasted a 2%-4% revenue growth and a 2.0%-2.5% adjusted EBITDA margin expansion for 2025. Under its 2024 divestiture program, Conduent Inc. (NASDAQ:CNDT) has been rationalizing its offerings portfolio under its 2024 divestiture program, and by November, had already allocated 75% of the $1.0 billion of proceeds to debt prepayment and share repurchases, strengthening its financial position.
5. Clean Energy Fuels Corp. (NASDAQ:CLNE)
Current Market Price: $3.40
Number of hedge funds: 22
Clean Energy Fuels Corp. (NASDAQ:CLNE) is a provider of natural gas as an alternative fuel for vehicle fleets in the United States and Canada. The company operates a network of fueling stations and offers a range of services to support the transition to cleaner energy solutions. Clean Energy Fuels focuses on providing renewable natural gas (RNG) and compressed natural gas (CNG) to reduce greenhouse gas emissions and promote sustainable transportation.
In Q3 2024, Clean Energy Fuels Corp. (NASDAQ:CLNE) reported a healthy 10% year-over-year (YoY) revenue growth and also narrowed its net loss to $18.2 million from the $25.8 million loss reported in Q3 2023. The company sold 59.6 million gallons of RNG which also saw a healthy 5.1% increase. President and Chief Executive Officer, Andrew Littlefair, called it a very solid quarter as the strength from the first half of the year continued in Q3 as well. He remains upbeat on the company’s RNG business and the partnership with Maas Energy. At the Q3 conference call, he stated:
“The beauty of RNG is that it can be used as a fuel itself or as the cleanest feedstock for other alternatives. Turning to our RNG production business. We continue to make good progress on our projects at dairy farms across the U.S. We currently have 6 operating projects, 2 projects under construction that are expected to come online in the second half of 2025 and other RNG projects in advanced development through our new partnership with Maas Energy.”
4. Petco Health and Wellness Company Inc. (NASDAQ:WOOF)
Current Market Price: $3.02
Number of hedge funds: 22
Petco Health and Wellness Company Inc. (NASDAQ:WOOF) is a leading pet health and wellness retailer offering a wide range of products and services for pets, including food, supplies, grooming, and veterinary care. The company operates a network of retail locations and provides an integrated approach to pet care, focusing on the health and well-being of pets and their owners.
Petco Health and Wellness Company Inc. (NASDAQ:WOOF) is well-positioned to take advantage of the growing pet care market, driven by increasing pet ownership and consumer spending on pet health and wellness. For Q3 2024, the company reported steady earnings results, with net revenue rising modestly to $1.51 billion (+1.2%). While growth was driven by the Consumables segment and Services & other businesses, a decline in the Supplies and Companion Animal segment partially offset that growth. Nevertheless, the company managed to reduce its net loss for the quarter to $6.5 million from a loss of $14.5 million in the previous year quarter. For Q4 2024, Petco Health and Wellness Company Inc. (NASDAQ:WOOF) anticipates net revenue of approximately $1.55 billion and an adjusted EPS ranging from $0.0 to $0.02. Overall, management is optimistic about the structural improvements made in the first nine months of the year, positioning them for a strong finish to 2024, and expects the momentum to continue into 2025.
3. Opko Health Inc. (NASDAQ:OPK)
Current Market Price: $1.65
Number of hedge funds: 22
Opko Health Inc. (NASDAQ:OPK) is a diversified healthcare company specializing in the development and commercialization of innovative medical technologies and pharmaceuticals. The company operates in various segments, including diagnostics, pharmaceuticals, and biotechnology, with a strong focus on improving patient outcomes through advanced healthcare solutions. Opko Health offers products such as Rayaldee, a treatment for secondary hyperparathyroidism; Somatrogon, a human growth hormone injection; and the diagnostics business, including BioReference Health.
In November, Opko Health Inc. (NASDAQ:OPK) reported its Q3 2024 results, showing total revenues of $173.6 million, compared with $178.6 million for Q3 2023. The company achieved an operating income of $14.2 million, a significant improvement from the $64.4 million loss in Q3 2023. This improvement was driven by a one-time gain of $121.5 million from the sale of select BioReference assets and $10.5 million from the GeneDx sale. Additionally, the company commenced enrollment in a Phase 1 trial for MDX2001, a tetraspecific antibody targeting solid tumor cancers. In January 2025, ModeX Therapeutics Inc., a subsidiary, announced the start of a Phase I study of an Epstein-Barr virus (EBV) vaccine candidate being developed in collaboration with Merck Sharpe & Dohme. With a robust pipeline, Opko Health Inc. (NASDAQ:OPK) is strategically positioned to benefit from the growing demand for innovative healthcare solutions.
2. Diversified Healthcare Trust (NASDAQ:DHC)
Current Market Price: $2.64
Number of hedge funds: 23
Diversified Healthcare Trust (NASDAQ:DHC) is a real estate investment trust (REIT) that specializes in owning and managing a diversified portfolio of healthcare-related properties across the U.S., including senior living communities, medical office buildings, and life science facilities. The company’s primary strategy is to generate steady income through long-term leases with healthcare operators and tenants, leveraging the increasing demand for healthcare services and facilities.
On February 2, 2025, Diversified Healthcare Trust (NASDAQ:DHC) reported the completion of the sale of MUSE, a 186,000 square foot, three-building life science property in Torrey Pines, San Diego, for $159.0 million. At the time of sale, the property was 49% leased, with an average lease term exceeding eight years. The company intends to use the sale proceeds to pay down its senior secured notes due in January 2026. As per the company’s business strategy, they occasionally sell properties if keeping them or the required expenses won’t provide the desired returns, if they’ve already maximized returns, or if better opportunities arise. In the long-term, Diversified Healthcare Trust (NASDAQ:DHC) is well-positioned to benefit from the aging population and increasing healthcare needs, which drive demand for senior living and medical office spaces.
1. Geron Corp. (NASDAQ:GERN)
Current Market Price: $2.82
Number of hedge funds: 29
Geron Corp. (NASDAQ:GERN) is a commercial-stage biopharmaceutical company focused on developing innovative cancer therapies. Their lead product candidate, imetelstat (RYTELO), is a telomerase inhibitor designed to target cancer stem cells. It has shown promise in treating hematologic malignancies, particularly myelofibrosis and other blood cancers.
In Q3 2024, Geron Corp. (NASDAQ:GERN) reported $28.2 million in net revenue following the successful launch of RYTELO in the U.S. in June 2024. The company expects to generate $45-$46 million in revenue for Q4 2024. During its January 2025 corporate presentation, Geron highlighted a significant market opportunity for RYTELO, driven by high unmet needs and significant product differentiation in treating lower-risk myelodysplastic syndromes (LR-MDS). Management estimates potential net revenue exceeding $1.0 billion by treating only one-third of treatment-eligible patients. The market is poised to expand significantly as the company awaits a potential approval decision by the European Commission in the first half of 2025. If approved, Geron Corp. (NASDAQ:GERN) plans to commercialize RYTELO in select EU markets starting in 2026.
While we acknowledge the potential of GERN to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GERN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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