We recently compiled a list of the 10 Best Penny Stocks to Buy Under $1. In this article, we are going to take a look at where Karyopharm Therapeutics Inc. (NASDAQ:KPTI) stands against the other penny stocks under $1.
Penny stocks are defined by the Securities and Exchange Commission (SEC) as stocks that trade for less than $5 per share. They exhibit high price volatility due to their low pricing. Even a slight movement in the stock price can translate into a substantial percentage gain. Despite this advantage, it’s important to be aware of the risks associated with penny stocks. A study conducted by the Securities and Exchange Commission (SEC) found that most penny stocks are speculative and have low liquidity, which makes it challenging to trade them. Only around one in 1,000 penny stocks goes on to become profitable mid-cap or large-cap businesses, according to the study. Therefore, even if penny stocks seem attractive, investing in them needs a thorough assessment of the dangers as well as the possible benefits.
Penny stocks may provide large profits, with particular industries expected to develop in 2024 as a result of technological improvements, legislative changes, and altering customer tastes. These dynamic industries may be of interest to investors looking to diversify their portfolios or seek strong growth potential.
Among the industries where one might look for penny stocks to purchase in 2024 is renewable energy. It has experienced tremendous growth in recent years. The global renewable energy industry was estimated at $1.21 trillion in 2023, with a compound annual growth rate (CAGR) of 17.2% between 2024 and 2030, per Grand View Research. In 2023, Asia Pacific had a noteworthy revenue share of 40.98%.
The IEA’s Renewables 2023 study states that in 2023, the capacity of renewable energy worldwide increased by 50% to approximately 510 GW, with solar photovoltaics accounting for three-quarters of these increases. Leading the way, China added twice as much solar PV as the rest of the world in 2022 and had a 66% rise in wind power. According to IEA 50, renewable energy capacity increased at unprecedented rates in Brazil, the United States, and Europe. As per the latest IEA research, under present policies and market circumstances, worldwide renewable capacity would rise by two and a half times by 2030. Hence, investors may interact with innovative companies at the forefront of solar, wind, and other renewable technologies by purchasing penny stocks in the renewable energy space.
Biotech penny stocks also provide a unique investment opportunity for investors interested in medical innovation and the potential of major breakthroughs in healthcare. Recent analysis by investment bank Jefferies indicates that biotechnology businesses raised about $10 billion in follow-on stock offerings in January and February, signaling increased optimism in the industry.
The size of the worldwide biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion, per Precedence Research. Currently, the biotechnology industry consists of 673 publicly traded stocks, including penny stocks, with a combined market capitalization of $1,511.21 billion.
Investors interested in biotech stocks may question which sectors are prone to buyouts. Laura Chico, Senior Biotechnology Analyst at Wedbush Securities, noted key areas to keep an eye out for possible buyouts:
“Obesity has been a really big theme in 2023, and will probably continue for the foreseeable future, but across the area, at least in these recent M&A transactions, it’s been really broad-based, and I think that’s really a testament to the innovation in the space. We have several deals in oncology, immunology, inflammation, neuro, and even rare diseases. So it’s not just within certain verticals at this point.”
Methodology:
In this article, we first used a stock screener to list down all stocks trading under $1 (as of the writing of this article) with over 40% institutional ownership. From the resulting dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks.
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).
A senior healthcare professional in front of a hospital discussing the benefits of a new cancer treatment.
Karyopharm Therapeutics Inc. (NASDAQ:KPTI)
Number of Hedge Fund Investors: 19
As a commercial-stage pharmaceutical company, Karyopharm Therapeutics Inc. (NASDAQ:KPTI) discovers, develops, and distributes medications targeted to prevent nuclear export for the treatment of cancer and other diseases. The company’s conviction in cancer patients’ tremendous fortitude and courage drives its efforts. Since its inception, Karyopharm has been an industry pioneer in oral medicines that treat nuclear export dysregulation, a key mechanism of oncogenesis. Karyopharm’s main drug and first-in-class oral exportin 1 (XPO1) inhibitor, XPOVIO (selinexor), is approved in the United States and sold by the company for three cancer applications. Additionally, it has obtained regulatory approvals for a variety of indications in an increasing number of former US territories and nations, such as China, Europe, the UK (under the brand name NEXPOVIO), and the United States. Karyopharm’s pipeline is narrowly targeted, with indications for certain high unmet-need cancers, such as multiple myeloma, endometrial cancer, myelofibrosis, and diffuse large B-cell lymphoma (DLBCL).
The company has faced high cash burns over the years. It decreased by over 43% since 2019, with slow annual revenue growth over the years, resulting in its shares declining. With a high quarterly (Q1 2024) cash burn rate of 42.97% and liquid assets expected to last only four to five quarters, Karyopharm is facing significant financial issues. The company’s Q1 2024 financials show a $37.4 million net loss in terms of revenue as well as a $38.7 million drop in sales from the same quarter previous year to $33.1 million, with U.S. XPOVIO’s net product revenue forecast to be between $100.0 million and $120.0 million by 2024. Sales of selinexor have been hampered by competition in the multiple myeloma market, and revenue has been further stretched by an increase in rebates and discounts. Significant risks are associated with the impending Phase 3 studies, and mistrust is raised by earlier selinexor failures. Karyopharm is a high-risk venture because of the lengthy wait for trial results, budgetary restrictions, and the lack of early, overwhelming trial effectiveness.
Despite these obstacles, Karyopharm Therapeutics Inc. (NASDAQ: KPTI) is making great progress with its nuclear exportin 1 inhibitor, selinexor, which is being presented in seven different ways at the ASCO meeting. The company is exploring the possibility of selinexor, its key product in treating endometrial cancer and myelofibrosis, through key trials that, if successful, may revolutionize the field. The SIENDO trial accomplished its primary aim, with patients receiving Xpovio showing a statistically significant increase in median progression-free survival compared to placebo. Karyopharm has enough liquid assets ($192.4 million) to cover its operations through the end of 2025. Significant debt restructuring was announced by Karyopharm, delaying most repayments until 2028-2029 and resulting in $30 million in liquidity on the balance sheet and a reduced selinexor royalty rate. Considering that the company has three key Phase 3 studies and many shots on target, its valuation of little over $100 million seems low (undervalued). The myelofibrosis studies and the endometrial cancer research, which focuses on TP53 wild-type patients in particular, have the potential to grow selinexor’s market beyond its present usage in multiple myeloma.
Furthermore, Karyopharm Therapeutics Inc. (NASDAQ:KPTI) has received an average price target of $4.60, reflecting analysts’ bullish outlook on the stock. The price target reflects a potential upside of over 424.64% from the current stock price of $0.88. Meanwhile, 5 analysts have given the stock a “Buy” rating.
Karyopharm Therapeutics Inc. (NASDAQ:KPTI) was owned by 19 of the 920 hedge funds that Insider Monkey examined in the first quarter of this year. Jonathan Berger’s Birch Grove Capital held the largest stake in the company, with 6,000,00 shares worth $3.21 million.
Overall KPTI ranks 4th on our list of the best penny stocks to buy under $1. You can visit 10 Best Penny Stocks to Buy Under $1 to see the other penny stocks that are on hedge funds’ radar. While we acknowledge the potential of KPTI as an investment, our conviction lies in the belief that some 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 KPTI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
