In this article, we will look at the 8 Penny Stocks with Biggest Upside Potential According to Analysts.
Why Are Rate Cuts Good for Small Caps?
The Federal Reserve slashed interest rates by a half point in September, kickstarting its first easing campaign in four years. It was the first interest rate cut since the early days of the Covid-19 pandemic. Rate cuts are considered broadly supportive of stocks, provided the economy is not in recession. Since the risk of recession in the US economy has been overruled, small-cap stocks are likely to benefit more from the rate cuts than their large-cap peers due to easing monetary policy. This is primarily because they are thought to be more likely to hold floating-rate debt.
However, Oxford Economics analysts noted that small-cap stocks’ performance has given mixed signals since the previous interest rate cuts. At best, rate cuts have helped moderate small caps’ underperformance compared to large caps in the late tightening cycle stages.
But this time can be different. Analysts at Oxford expect small caps to be “outsized beneficiaries of the upcoming rate cuts…due to their relatively weak balance sheets.” Several factors are likely to alleviate the small caps’ balance sheet pressure, including easier economic conditions, resilient business and consumer spending, and reduced borrowing costs.
Generational Opportunity for Small to Mid-Cap Stocks
On October 4, Eduardo Lecubarri, managing director and global head of small and mid-cap equity strategy at J.P. Morgan, talked about the potential of investing in small to mid-cap stocks in an interview on CNBC. He breaks down the opportunities in the space, while shedding light on how to pick the right stocks in what he calls a “generational opportunity.” He says that we are living in a tricky world where the opportunity to invest lies in realizing the hidden value in the small and mid-cap sector and picking the right stocks instead of investing broadly.
He claims that times have changed, with small and mid-caps stocks going from being not the most suitable investment in previous years to paving the way for the biggest opportunity in the sector in the past 2-3 decades. He further elaborated and said that the opportunity of picking a small to mid-cap versus large-cap stock is bigger now than he has ever seen in the past 30 years. This generational opportunity, however, is not without its pitfalls for those who fail to make the right picks.
Pricing power and high-margin businesses can be suitable indicators of the right small to mid-cap stocks to invest in, according to Lecubarri. The need to find value and invest in stocks with achievable earnings growth expectations also holds pivotal value in making the right choices. While 2022 to 2023 was the time to stay away from small to mid-cap stocks, Eduardo Lecubarri says that times have changed with the stabilizing economy.
With these trends in view, let’s look at the 8 penny stocks with biggest upside potential according to analysts.
8 Penny Stocks with Biggest Upside Potential According to Analysts
Our Methodology
For this article, we used stock screeners to identify around 30 penny stocks under $5 with a market cap over $500 million and with high analyst upside potential, as of 6 October, 2024. We also considered the number of hedge fund holders as of Q2 2024. The stocks are listed in ascending order of their upside potential.
Why are we interested in 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).
8 Penny Stocks with Biggest Upside Potential According to Analysts
8. Opthea Limited (NASDAQ:OPT)
Share Price: $4.46
Upside Potential: 169.08%
Number of Hedge Fund Holders: 3
Opthea (NASDAQ:OPT) is a clinical-stage biopharmaceutical company based in Australia. It develops novel therapies to address the gaps in treating progressive and prevalent retinal diseases, including diabetic macular edema (DME) and wet age-related macular degeneration (wet AMD). The company’s lead product candidate is sozinibercept (OPT-302). It is under evaluation in two pivotal Phase 3 clinical trials for its use in combination with standard-of-care anti-VEGF-A monotherapies for treating DME and wet AMD.
The company has also manufactured OPT-302 for use in Phase III clinical trials. It supports the commercialization of the product through various activities and has expanded its US-based management team to facilitate the execution and oversight of its Phase III program. Opthea’s (NASDAQ:OPT) development activities are based on an intellectual property portfolio covering key targets, including vascular endothelial growth factors VEGF-C, VEGF-D, and VEGF Receptor-3.
The company made substantial progress in advancing sozinibercept’s Phase 3 wet AMD program in fiscal 2024. It completed enrollment enrollment in both COAST and ShORe pivotal trials that evaluated the superiority of sozinibercept combination therapy. In addition, the company is strengthening its balance sheet with around $300 million in financial proceeds. It is expecting to use its existing cash and cash equivalents to fund the anticipated topline data readouts of COAST in early Q2 in calendar year 2025 and ShORe in mid-calendar year 2025.
These funds will also help the company go through the Biologics License Application (BLA) preparations for FDA approval, progress Chemistry, Manufacturing, and Controls (CMC) activities, and prepare the organization for a potential launch of sozinibercept in wet AMD. The company ranks eighth on our list of the 8 penny stocks with biggest upside potential according to analysts.
7. Autolus Therapeutics plc (NASDAQ:AUTL)
Share Price: $3.89
Upside Potential: 182.05%
Number of Hedge Fund Holders: 24
Autolus Therapeutics (NASDAQ:AUTL) is a clinical-stage biopharmaceuticals company based in the United Kingdom. It develops programmed T cell therapies for treating autoimmune diseases and cancer and focuses on chimeric antigen receptor (CAR) T cell therapy. The company engineers controlled, targeted, and highly active T cell therapy product candidates designed to recognize target cells, break their defense mechanisms down, and eliminate them. It is doing so using a portfolio of proprietary and modular T-cell programming technologies.
Autolus Therapeutics (NASDAQ:AUTL) also has a pipeline of product candidates to treat solid tumors, hematological malignancies, and autoimmune diseases. The company has partnered with several healthcare players to increase capital. This initiative includes a partnership with BioNTech, which added $600 million to the company’s balance sheet in Q1 2024.
In addition, the company has a deal with Blackstone Life Sciences to provide around $250 million in financing for its drug development and commercialization. Blackstone’s interest in the company is due to its potential to deliver lifesaving treatments to cancer patients.
The company’s AUTO6NG program initiated patient treatment in Q2, with plans to share additional publications and clinical data regarding the programs in the second half of 2024. The launch of Obe-cel is also expected to take place in the US market soon, with a PDUFA date set for November 16. Autolus Therapeutics (NASDAQ:AUTL) has submitted a Market Authorization Application (MAA) to the UK’s MHRA for Obe-cel.
6. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD)
Share Price: $4.33
Upside Potential: 183.69%
Number of Hedge Fund Holders: 27
Ironwood Pharmaceuticals (NASDAQ:IRWD) is a gastrointestinal (GI) healthcare company that works to advance the treatment of GI diseases and redefine the standard of care administered to such patients. It develops LINZESS (linaclotide) for adults with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC). It is also an approved treatment for functional constipation in pediatric patients ages 6-17 years old.
The company is advancing apraglutide, a long-acting synthetic glucagon-like peptide-2 (GLP-2) analog for rare gastrointestinal diseases, including short bowel syndrome with intestinal failure (SBS-IF), and several other earlier-stage assets. It is also advancing the potential treatment of visceral pain conditions, such as interstitial cystitis/bladder pain syndrome (IC/BPS) and endometriosis, through IW-3300, a GC-C agonist. Another of the company’s treatments is CNP-104, which treats PBC, a rare autoimmune disease targeting the liver.
Ironwood Pharmaceuticals (NASDAQ:IRWD) is making continuous progress across its strategic priorities. Prescription demand for its products is high, including an 11% increase in LINZESS in Q2. New-to-brand prescriptions are also seeing continued strength, growing 15% compared to last year. These trends make Q2 the sixth consecutive quarter of double-digit new-to-brand volume growth, highlighting the growing demand for LINZESS among healthcare providers and patients.
Apraglutide boasts a strong clinical profile, including the convenience of once weekly dosing, demonstrated high compliance rates as seen in the STARS Phase 3 study, and low incidence of both GI tolerability issues and injection site reactions. Such capabilities position it for success in the domain.
The company is also developing a solid patient service program to help boost adherence to therapy. It is advancing its launch planning, and is planning to commercialize apraglutide, once approved, through an established sales force with considerable repute among GI specialists across the US. It takes the sixth spot on our list of the top 8 penny stocks with biggest upside potential according to analysts.
5. Globalstar, Inc. (NYSE:GSAT)
Share Price: $1.20
Upside Potential: 231.20%
Number of Hedge Fund Holders: 16
Globalstar (NYSE:GSAT) is an international telecom infrastructure provider offering wholesale capacity services and mobile satellite services such as voice and data communication through its global satellite network. The company offers these services over its network of ground stations and in-orbit satellites. Its communication services include an elaborate portfolio, including two-way voice communication and data transmissions via its GSP-1600 and GSP-1700 phone, one-way or two-way communication and data transmissions using mobile devices, one-way data transmissions using a mobile or fixed device, and others.
Globalstar (NYSE:GSAT) experienced a solid second quarter, undergoing a 10% year-over-year total revenue increase. Total revenue reached a record high of $60.4 million in Q2, with cash on hand reaching $64 million. The company is continually building liquidity ahead of its milestone payments because of its next-generation satellite vendors in the coming months. 95% of these costs are recovered through contractual service fees throughout the satellite lifetime. These satellites are on schedule, with the first launch expected in 2025.
The company boasts a fully funded business plan with a solid foundation of contractual cash flows expected to grow, positioning the company in a robust financial landscape. It is also making targeted investments in consumer retail offerings, capitalizing on the opportunity to make reasonable economic returns in the domain.
In addition, Globalstar’s (NYSE:GSAT) consumer IoT business is continuing to grow, experiencing substantial success in testing new technologies that boost the company’s profitability. It is also engaging its existing consumer base to develop an efficient plan to roll these capabilities out.
The company has also made substantial additions to its product development organizations on both the engineering and commercial sides. This positions the company to bring its technologies and products to market in a streamlined fashion.
4. Archer Aviation Inc. (NYSE:ACHR)
Share Price: $2.99
Upside Potential: 240.14%
Number of Hedge Fund Holders: 21
Archer Aviation (NYSE:ACHR) is an aerospace company specializing in designing and developing electrical vertical takeoff and landing (eVTOL) aircraft for use in urban air mobility (UAM) networks. Its eVTOL aircraft hold a competitive edge for being safe, quiet, and sustainable. Midnight, its production aircraft, can carry four passengers and a pilot and is optimized to conduct back-to-back short-distance trips of about 20 miles. It has a minimal charging time between trips.
Archer Aviation (NYSE:ACHR) intends to conduct two complementary lines of business: Archer Direct for the sale of its aircraft to other operators and Archer UAM for a direct-to-consumer aerial ride-share service.
The company is running on a robust operational model, gaining several accomplishments in Q2 2024. It completed Midnight’s first transition flight. Since Midnight is a 6,500-pound maximum takeoff weight aircraft, this feat makes it the largest eVTOL aircraft to have successfully transitioned.
The company also reached two regulatory milestones in the US in the quarter. Both these milestones are critical to attaining FAA certification. It first achieved Midnight’s airworthiness criteria, allowing it to proceed with the final certification process stages. In addition, it is starting to build its own fleet of six aircraft. These aircraft have systems that conform to these requirements, allowing the company to continue credit testing with the FAA.
It has also attained its Part 135 certificate, which allows it to operate eVTOL airlines across the US after Midnight’s type certification. This is a significant milestone, as it will allow Archer Aviation (NYSE:ACHR) to deploy aircraft in critical markets on behalf of its domestic airline customers, such as United and Southwest.
The company is also continually advancing its certification endeavors in particular international markets with exceptional opportunities for expedited deployment. These areas include Korea, India, and the UAE. Archer Aviation (NYSE:ACHR) ranks fourth on our list of the 8 penny stocks with biggest upside potential according to analysts.
3. Sana Biotechnology, Inc. (NASDAQ:SANA)
Share Price: $4.33
Upside Potential: 252.94%
Number of Hedge Fund Holders: 15
Sana Biotechnology (NASDAQ:SANA) is a biotechnology company that specializes in using engineering cells as medicines. It develops cell engineering programs that transform treatment across several therapeutic areas with treatment gaps, including diabetes, oncology, the central nervous system, and B-cell-mediated autoimmune disorders.
The company boasts a pipeline of clinical product candidates focused on creating transformative ex vivo therapies across several therapeutic areas, including SC255, SC262, SC291, UP421, SC 451, and C379. SC255 treats multiple myeloma and is a B-cell maturation antigen-directed allogeneic CAR T, while SC262 is a hyperimmune-modified CD22-directed allogeneic CAR T program. SC262 is initially used as a potential treatment for relapsed and/or refractory B-cell malignancies.
Sana Biotechnology (NASDAQ:SANA) is also applying its technology to donor-derived T cells for use as allogeneic cell therapies for hematologic malignancies. The hypoimmune platform deals with one of the primary challenges of allogeneic cell transplantation and holds the potential to affect a wide array of diseases. It has four ongoing trials and is making continual progress with them. It is accelerating investments to decrease its reliance on external manufacturing because of the ongoing geopolitical uncertainty, increase its clinical trial site footprint across the globe, and boost investments to develop its pivotal-ready supply chain.
It is committed to excellence, and is thus enrolling patients in the GLEAM trial for SC291 in B-cell mediated autoimmune diseases. The trial is expected to report initial clinical data in 2024. In addition, it is continuing to advance its hypoimmune technology in four trials across several indicators in oncology, type 1 diabetes, and B-cell-mediated autoimmune diseases.
The company is also enrolling patients in two oncology trials: VIVID for SC262 in relapsed/refractory B-cell malignancies and ARDENT for SC291 in B-cell malignancies. It is also expecting to report initial clinical data for its investigator-sponsored trial with hypoimmune-modified primary islet cells in 2024. Such continued initiatives give the company a competitive edge, positioning it as one of the best penny stocks with the biggest upside potential according to analysts.
2. AbCellera Biologics Inc. (NASDAQ:ABCL)
Share Price: $2.53
Upside Potential: 383.87%
Number of Hedge Fund Holders: 16
AbCellera Biologics (NASDAQ:ABCL) solves antibody discovery problems by integrating data science, technology, infrastructure, and interdisciplinary teams. It develops and discovers antibody medicines for indications across therapeutic areas, including metabolic and endocrine conditions, cancer, and autoimmune disorders. It boasts technology platforms that unlock drug classes, modalities, and targets, including T-cell engagers, peptide-MHCs, and transmembrane proteins.
The company is focusing attention on advancing its internal program pipeline and collaborating with partners on drug development programs. Programs ABCL635 and ABCL575 are the first two preclinical programs in its internal pipeline. ABCL635, an antibody-drug candidate, is used against an undisclosed target with an indication in endocrine and metabolic conditions. ABCL575 is being developed as a therapy to treat atopic dermatitis and other indications of inflammation and autoimmunity. It targets the OX40 ligand. Since both ABCL575 and ABCL635 are progressing well, the company expects to submit Clinical Trial Applications in Q2 of 2025.
AbCellera Biologics (NASDAQ:ABCL) continued to focus its capital allocation in Q2 2024, primarily in three domains. These include building and advancing its internal pipeline, executing specific strategic partnerships, and completing investments in its facilities and platforms.
The company is in a strong liquidity position. It has around $220 million in available government funding and $700 million in cash to continue executing its strategy. It continued to implement its plans to complete its GMP and CMC investments in Q2 2024. It also started to work on three partner-initiated programs in its key business metrics. This initiative takes its programs to a cumulative total of 93 programs with downstream participation.
AbCellera Biologics (NASDAQ:ABCL) has received commitments for funding the advancement of its internal pipeline and improving its GMP facility from the Government of British Columbia and the Strategic Innovation Fund from the Government of Canada. This capital does not show up on the company’s balance sheet. With nearly $700 million in cash and the unused portion of this secured government funding, the company has more than $900 million in total available liquidity to execute its strategies. Its capital needs are thus very manageable with respect to its overall operating expenditure, with sufficient liquidity to fund more than the next three years of its pipeline and platform investment.
1. Wheels Up Experience Inc. (NYSE:UP)
Share Price: $2.33
Upside Potential: 1,361.19%
Number of Hedge Fund Holders: 7
Wheels Up Experience (NYSE:UP) provides private aviation in the United States through an elaborate global aviation solution. Its network of safety-vetted charter operators and diverse fleets are part of a global network. Wheels Up Experience (NYSE:UP) employs its open platform to connect private flyers to aircraft and to each other.
Users can avail of its private aviation services through its membership program, which allows members to select a membership that meets their flying needs. They can also receive additional benefits by buying dollar-denominated credits that apply to future costs, such as annual dues, flight services, and other incidental costs like ground transportation and catering.
The company offers global charter solutions to its members and non-member customers through Air Partner Limited, its subsidiary. It also provides wholesale charter services and other services and activities. The wholesale charter services include third-party operators and charter flight brokers.
Wheels Up Experience (NYSE:UP) exceeded its internal goals in Q2, increasing its completion rate and on-time performance to 99% and 87%, respectively. In Q1, it introduced an additional benchmark known as brand days, or days in which the company had zero cancellations of any type across its entire controlled fleet. Total brand days in Q2 reached 31 days, a new record for the company and a 15% increase from Q1.
The company is leading the industry in operational transparency. It has solid and improved operational performance, and is the first and only significant private aviation operator to publicly share its operational performance.
Wheels Up Experience (NYSE:UP) announced an enhanced and streamlined product portfolio in June, offering global access through options for membership and charter for experienced and first-time private flyers alike. In an attempt to capitalize on the large portion of the addressable private aviation market, the company’s refreshed product portfolio offers industry-leading solutions that prioritize flexibility, accessibility, and simplicity through two primary offerings: Wheels Up Charter and Wheels Up Membership.
The Wheels Up Charter allows members to book ad hoc trips from anywhere in the world without any upfront cost. The Wheels Up Membership charges a small annual fee that, along with upfront-funded flight hours, offers dynamic rates with expanded global access, price protection, and increased flexibility. More importantly, it offers guaranteed availability and recovery within the UK, Europe, and the US.
Overall, UP ranks first among the 8 penny stocks with biggest upside potential according to analysts. While we acknowledge the potential of penny stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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