We recently compiled a list of the 10 Most Volatile Stocks Under $3 For Day Trading. In this article, we are going to take a look at where Butterfly Network, Inc. (NYSE:BFLY) stands against the pump and dump stocks.
Day trading involves buying and selling stocks within a single trading day to capitalize on short-term price movements. Volatile stocks are often preferred for their frequent price swings, creating opportunities for quick profits. Equity beta, which measures the sensitivity of a stock’s return to market changes, is a key metric often used by investors for gauging volatility. Day traders close their positions by the end of the trading day to avoid the risks associated with holding overnight, such as unexpected market events, earnings announcements, or global developments that can drastically impact stock prices before the next trading session begins. While penny stocks, particularly those priced under $3.00 per share, are appealing due to their low entry cost and potential for rapid gains, they also carry heightened risks like low liquidity and susceptibility to manipulation. The key takeaway for readers is that these trades shall be approached with cautiousness and a clear strategy with risk management in place.
READ ALSO: 10 Best Stocks For Day Trading
Stocks under $3.00 offer a distinct advantage in that they typically operate below the radar of hedge funds, which prioritize larger, more liquid investments to accommodate their substantial capital and complex strategies. Hedge funds, the most informed and skilled investors, leverage extensive resources, market expertise, and advanced analytics to gain a competitive edge. Their absence in the penny stock space leaves more room for retail investors to seize opportunities without competing against institutional investors’ sophisticated tactics. This lack of institutional interest can create less efficient pricing, offering well-researched retail traders the potential to identify undervalued stocks and profit from short-term volatility via day trading.
Short-term trading strategies become more attractive during times of macroeconomic uncertainty, which can further fuel volatility and create opportunities for swing trading. The main volatility index in the US market still remains elevated vs. its moving average as investors have a hard time digesting the tariffs situation and the abrupt cuts in federal workforce and spending. Bond yields are reluctant to price in lower rates in the future – despite odds of an economic recession rising substantially if compared to the beginning of the year, the potentially accelerating inflation, as fueled by tariffs, will likely keep rates high. Regardless of what happens, it is clear that Trump 2.0 gives investors plenty of anxiety – many have been actively seeking cheaper investments abroad, particularly in Europe, which has caused the US stock market to relatively underperform the rest of the world.
Small-cap stocks are usually the most affected during periods of heightened volatility. The good news is that the Bull-Bear Ratio compiled by Investors Intelligence fell to 1.3 during the past week, which, from a contrarian perspective, is a bullish signal. This means that pockets of opportunity might soon return to the penny stocks category, both for long-term investors and day traders. Despite short-term fears and uncertainty, the fundamentals of the US stock market remain solid, with future earnings estimates staying strong and potentially seeing an uplift from tax cuts later this year or next. We suggest considering stocks with a high equity beta, above 2.0, as this category will likely outperform in a rising market.
A doctor looking at a ultrasound system with a Compass software interface, demonstrating the sophistication of the device.
Our Methodology
We used Finviz to filter companies with a share price under $3.00 and that have an equity beta above 2.0. Then we compared the list with Insider Monkey’s proprietary database of hedge funds’ holdings as of Q4 2024 and included in the article the top 10 stocks with the highest hedge fund ownership.
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).
Butterfly Network, Inc. (NYSE:BFLY)
Number of Hedge Fund Holders: 26
Butterfly Network, Inc. (NYSE:BFLY) is a digital health company that focuses on revolutionizing medical imaging through its handheld ultrasound technology. It develops the Butterfly iQ, a portable, pocket-sized ultrasound device that connects to smartphones and provides real-time imaging for a variety of medical applications. The company’s technology uses a single, advanced semiconductor chip for imaging, which reduces cost and complexity compared to traditional ultrasound systems. BFLY offers its products to healthcare providers, including hospitals, clinics, and individual practitioners, with a focus on improving diagnostic accessibility and efficiency. Revenue is generated through device sales, subscriptions, and cloud-based services. The US-based company ranked first on our recent list of 10 Hot Penny Stocks to Buy Now.
Butterfly Network, Inc. (NYSE:BFLY) delivered strong financial performance in 2024 with revenue of $82.1 million, representing 25% top-line growth, while improving adjusted EBITDA by 42% to a loss of $38.9 million. The launch of iQ3 was notably successful, representing 50% of overall 2024 sales and units and 58% of Pro revenue, delivering higher ASPs than their second-generation device. The company has expanded its market presence with doctors who previously hesitated to choose Butterfly now adopting iQ3, existing users upgrading, and new users trading in competitive devices. The company strengthened its financial position through a follow-on offering in late January 2025, raising $81.7 million to provide a bridge to cash flow independence.
Looking forward, Butterfly Network, Inc. (NYSE:BFLY) has provided 2025 revenue guidance of $96 million to $100 million, representing approximately 20% growth, with an adjusted EBITDA loss of $37 million to $42 million. The company is advancing strategic initiatives including Octiv partnerships, with five partners now signed including Sonic Incytes, and the HomeCare business which is showing promising early results in pilot programs. The company is focusing on scaling in 2025 with planned software improvements to enhance data management workflows, expand EMR integrations, and make data management more valuable for smaller customers. With an equity beta of 2.55, BFLY is one of the most volatile stocks under $3 for day trading.
Overall BFLY ranks 3rd on our list of the most volatile stocks under $3 for day trading. While we acknowledge the potential of BFLY as an investment, 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 BFLY 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.
