Investor interest in Reddit penny stocks (that is, penny stocks popular on platforms like r/WallStreetBets) may have peaked several months back. Yet, while interest has faded, the trend itself has not disappeared. Speculators online continue to chatter about which “hot stocks” are about to make massive moves higher.
Admittedly, much of this is built more on hype, than on actual “game-changing” developments just around the corner. But, in the case of some of these names popular with the Reddit set, they may be onto something.
How so? Between companies seizing opportunity in the fight against Covid-19, to companies jumping into the new gold rush (crypto mining), many of these so-called “meme stocks” have more going for them than just irrational enthusiasm. Their plans may not be guaranteed to pan out. But, if they do, it could result in big returns for those buying these names (many of which have pulled back significantly) today.
So, which Reddit penny stocks with ambitious plans could pay off down the road? Consider these seven high-risk, high-potential plays as ones where risk/return leans in your favor:
- American Resources (NASDAQ:AREC)
- Cinedigm (NASDAQ:CIDM)
- Ault Global Holdings (NYSEAMERICAN:DPW)
- Jaguar Health (NASDAQ:JAGX)
- Naked Brand Group (NASDAQ:NAKD)
- Precipio Inc. (NASDAQ:PRPO)
- Support.com (NASDAQ:SPRT)
Reddit Penny Stocks: American Resources (AREC)
Source: J.J. Gouin
At first glance, AREC stock is your run-of-the-mill small-cap basic materials play. The company’s main businesses are involved in metals recycling and metallurgical carbon. But, as InvestorPlace’s Tom Taulli discussed last month, its exposure to the rare earth metals trend may be the main attraction.
American Resources’ rare earth venture is still in its early stages. But, as demand for rare earth metals heats up, thanks to the use of such materials in electronics and electric vehicle (EV) batteries, this could scale up into a significant segment for the company. On top of this is the projected long-term growth in the use of metallurgical carbon.
Put it all together, and it’s easy to see why Reddit investors went wild for AREC stock earlier this year. During “meme stock madness,” the stock went from $2.15 per share, to prices topping $8 per share. However, as the hype has faded, shares have given back almost all of their gains, and are currently changing hands for around $3 per share.
This sell-off may have been tough on those who bought near the top. Yet, if you’re just discovering this stock now, taking a chance on this high-risk play with big plans could pay off down the road.
Source: Pavel Kapysh / Shutterstock.com
Cinedigm may not be a household name. But, through M&A and partnership deals, it’s slowly becoming a major name in the content streaming space. Sure, this company isn’t going to give “big media” powerhouses like Disney (NYSE:DIS) and Viacom (NASDAQ:VIAC) a run for their money anytime soon.
But, by consolidating independent media libraries, and building out a network of ad-supported streaming channels, it still stands to eventually become a profitable player on the fringes of the entertainment industry. At the very least, it could wind up being a great bolt-on acquisition target for a larger independent media company. Or, become something private-equity snaps up, in an attempt to roll-up small and mid-sized streaming companies.
So far this year, investors have been more hyped up about its exposure to the NFT (non-fungible token) trend. However, over the long-term, the expansion of its streaming unit is what’s going to give the stock the most runway.
As NFT mania takes a breather, shares have pulled back. The stock trades for around $1.30 per share today. It may take years for this business to break out, but long-term investors may find this one appealing.
Ault Global Holdings (DPW)
Source: Mark Agnor / Shutterstock.com
What is Ault Global Holdings? It’s complicated. You may know of it mainly from its dabbling in the Bitcoin (CCC:BTC-USD) mining space, which it’s getting back into, after getting out of it prior to the recent bubble. But, there’s a lot more going on here with this Reddit penny stock than just crypto mining.
The company’s main units include Gresham Worldwide (aerospace/defense technology), and Coolysis Technologies (power products). Ault also holds a grab bag of equity investments in privately-held and publicly-traded companies. One of note is their investment in Brooklyn ImmunoTherapeutics (NYSEAMERICAN:BTX), formerly known as NTN Buzztime.
Earlier this year, Ault bought 295,000 shares back before NTN’s reverse merger with Brooklyn, at an average price of $3.42 per share. Unfortunately, the company sold off most of its stake in March, well before BTX stock became one of the hottest “meme stocks” around.
Only time will tell whether the constant wheeling and dealing will pay off for DPW stock. This was a meme stock itself last winter, when it rallied from under $2 per share, up to as much as $10.94 per share. But, following its collapse, taking a gamble on it now may be a long-shot that winds up paying off.
Reddit Penny Stocks: Jaguar Health (JAGX)
Source: Spyro the Dragon/Shutterstock.com
Even before the peak of meme/Reddit stock mania, JAGX stock was a name hyped up extensively online. The reason? The potential marketability of its Mytesi diarrhea treatment to those experiencing long-haul Covid-19 symptoms. Speculation over this sent the stock on a ten-fold run from mid-December to early-January.
However, since then, shares have taken a massive dive, and now trade at around $1.27 per share. The overall decline of “meme stocks” may have been the main driver. Yet, some recent hot water the company has gotten into likely hasn’t helped.
Congresswoman Carolyn Maloney has accused the company of price gouging with Mytesi, which for now is sold as a treatment for HIV/AIDS patients on antivirals. After failing to secure emergency use authorization (EUA) for Covid-related use of Mytesi, Jaguar more than tripled its per-bottle price. The product is still in the running for regular FDA (Food and Drug Administration) approval. But, bad optics like this may hurt its prospects of getting such approval.
In short, right now things look like they’re taking a turn for the worse. The stock may be fast headed back to sub-$1 per share price levels. But, if it manages to overcome the bad press, could Mytesi be approved for long-haul Covid use? Such a change in events could fuel a tremendous rebound.
Naked Brand Group (NAKD)
Naked Brand Group isn’t going into crypto. Nor is it, all of a sudden, becoming a biotech company developing treatments/vaccines for Covid-19. But, this purveyor of intimate apparel is jumping on another megatrend, e-commerce.
As you likely know, NAKD stock became one of the hottest of the Reddit penny stocks back in January, when the company announced plans to divest its unprofitable physical store locations, and double-down on its online retail unit. Sure, the hype around this news wound up to be unprofitable for those who bought the stock too late.
Briefly hitting prices above $3 per share, Naked stock has since cratered back to literal pennies (around 55 cents per share). The hype has since left the room. But, those getting in today may be doing so at a favorable entry point. Why? For starters, when its stock was trading at inflated levels, the company smartly raised cash via direct offerings.
As a result, it’s now sitting on as much as $270 million. Not bad, considering it now has zero debt, and a $282 million market capitalization. Now, it’s likely going to burn through much of its cash hoard, given its plans to scale into a major e-commerce apparel retailer. But, with heavy pessimism priced-in, downside if its ambitions fail to pan out may be minimal, compared to the potential gains in its stock price if the digital transformation succeeds.
Source: Cryptographer / Shutterstock.com
Less than a month ago, PRPO stock was trading for less than $2 per share. Yet, with recent news of its rapid Covid-19 test becoming available for use, shares in this medical products company have zoomed to near what’s considered the top range for penny stocks ($5 per share).
Sure, this may be a “one and done” catalyst. That is, now that more Americans have received the vaccine, the country is possibly inching closer to herd immunity. If we see a dramatic decrease in cases, and the path back to the “old normal” accelerates, demand for this product may quickly evaporate.
Yet, even short-lived success with the product could pay off in the long-run for Precipio. If its makes a decent profit during the brief window rapid Covid-19 antibody tests are in demand, it could use the cash to help fuel the further development of the rest of its diagnostic products pipeline.
After spiking on the first trading day of May, PRPO could pull back further from here. But, after it settles down a bit, this under-the-radar name in the healthcare space with interesting plans could still make for a decent opportunity for more risk-hungry investors.
Reddit Penny Stocks: Support.com (SPRT)
Last month, I made the case why this company, currently a provider of outsourced customer support services, could end up being one of the best crypto mining plays out there.
How so? The company is in the process of merging with privately-held Bitcoin miner Greenidge Generation Holdings. You may not have heard of Greenidge. But, with ownership of its own electrical power source, it may have an edge over the better-known crypto mining plays such as Marathon Digital (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT).
Not only that, with Support.com’s legacy net operating losses (NOL), the combined company may be able to shelter much of its potential Bitcoin mining profits from taxation. To top it all off, this reverse merger deal may be priced in favor of existing owners of SPRT stock.
Sure, although it went parabolic on news of the deal, investors have since taken the money and run. This may indicate that this deal won’t play out as well as it seems on paper. Also, if Bitcoin crashes, the bull case for this stock, along with the other crypto mining plays, will take a serious hit. Yet, for those looking for stocks with exposure to this alternative asset class, a name like Support.com may be the best way to play it.
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On the date of publication, Thomas Niel held a long position in Bitcoin. He did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.