We recently published a list of 10 Penny Stocks With Huge Upside Potential According To Analysts. In this article, we are going to take a look at where Beyond Air, Inc. (NASDAQ:XAIR) stands against other penny stocks with the biggest upside potential.
Penny stocks trade below $5 and attract investors looking for high returns with a small initial investment. These stocks are often associated with small-cap and mid-cap companies, which have traditionally outperformed large-cap stocks due to their growth potential and higher risk. However, in recent years, these smaller firms have struggled to keep pace, as large-cap stocks—particularly major tech companies—have led market gains. A key factor behind this trend is the changing makeup of major stock indices. The broader market, heavily influenced by a handful of mega-cap stocks, has skewed overall market performance. If the so-called Magnificent Seven stocks were excluded, the wider market’s advantage over the small-cap Russell index would be significantly reduced. Historically, small-cap stocks have tended to outperform large caps following periods of market volatility.
At the end of December 2024, Fundstrat’s Tom Lee told CNBC that with the Fed cutting rates and a pro-business administration taking over, companies would likely see 2025 as a prime time for expansion, including mergers and acquisitions. He believes this will create a strong market for small and mid-cap stocks, with financials, cyclicals, and industrials benefiting the most. Lee also pointed out that Trump’s tariff policies and potential labor market disruptions from mass deportations could impact the stock market. Another risk is if the Fed focuses too much on inflation and weakens the labor market. On a different yet interesting note, he predicted Bitcoin could hit $250,000 in 2025, with Ethereum reaching $5,000-$6,000. He was also optimistic about Solana and other altcoins.
Similarly, Jill Carey Hall, who is BofA’s Head of US Small/Mid Cap Strategy, recently commented that financials and healthcare tend to see more mergers and acquisitions under Republican administrations, which could mean a strong market in 2025 if macro conditions stay favorable. She expects banks to benefit from a more relaxed regulatory environment, improving their margins and efficiency. While there is optimism around deregulation for small-cap stocks, she cautioned that in the recent past, they did not perform as well despite deregulation because their success was tied to tariffs, trade policies, and the manufacturing recession.
Further insights came from Chris Retzler, portfolio manager for Needham’s Small Cap Growth Fund, who shared his outlook for small-caps on CNBC’s Squawk Box on January 17, 2025. He noted that small-cap companies are looking for policy certainty, and once the new administration’s direction becomes clearer, we could see growth accelerate. Globally, the EV sector is thriving, even as it faces some hurdles in the United States.
Meanwhile, innovation in semiconductors, new materials, and infrastructure, especially data centers, is driving investment, creating opportunities for small caps as well. Retzler emphasized that if the government prioritizes American manufacturing, more infrastructure will be needed, benefiting small-cap stocks. He also highlighted the potential upside of moderate, well-implemented tariff policies and deregulation, which could boost M&A activity. When small caps are acquired and integrated into larger platforms, it helps recycle assets and reduce costs. IPOs may soon pick up, and Retzler sees a strong and optimistic market for small caps in the long run.
A scientist working in a lab, researching effective treatments for COVID-19.
Our Methodology
We checked multiple reliable sources to find penny stocks with big catalysts and strong growth potential. To see what retail investors are buzzing about, we also looked through Reddit discussions. Then, we checked Wall Street analysts’ average upside predictions for these stocks. We have also included the number of hedge funds holding each stock as of Q4 2024. The list below ranks them in ascending order based on upside potential as of March 20.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Beyond Air, Inc. (NASDAQ:XAIR)
Average Upside Potential as of March 20: 340.98%
Number of Hedge Fund Holders: 10
Beyond Air, Inc. (NASDAQ:XAIR) is a medical device and biopharma company developing innovative nitric oxide treatments. Its LungFit platform targets newborn pulmonary hypertension, viral lung infections, and nontuberculous mycobacteria. The company also explores nitric oxide-based therapies for autism and neurological disorders. XAIR ranks 6th on our list of stocks with the biggest upside.
On March 11, Beyond Air, Inc. (NASDAQ:XAIR) announced plans to expand the reach of its LungFit PH system with new distribution deals in France, Romania, Turkey, and Morocco. Just 15 weeks after receiving CE Mark approval, the system is now available in 18 countries, with more agreements on the way. The company expects international adoption to move faster than in the United States, due to experience gained from US hospitals and strong distribution partnerships.
Beyond Air finished the quarter ending December 31, 2024, with $1.1 million in revenue, a notable increase from $0.4 million in 2023. However, costs ran higher due to LungFit device depreciation and upgrade expenses. The company reported a $2.4 million loss, largely from writing off debt. As of December 31, XAIR had $10.9 million in cash and securities, with $11.8 million in debt, though repayments do not start until October 2026. With its current cash strategy and expected revenue growth, Beyond Air believes it has enough funds to operate well into 2026.
Among the hedge funds tracked by Insider Monkey in Q4 2024, 10 funds reported owning stakes in Beyond Air, Inc. (NASDAQ:XAIR), compared to 9 funds in the last quarter.
Overall, XAIR ranks 6th on our list of penny stocks with huge upside potential. While we acknowledge the potential of XAIR to grow, our conviction lies in the belief that certain 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 XAIR 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 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
