Stocks trading under the $5 mark, which are known as penny stocks are usually favored by retail investors. Since penny stocks are highly volatile, they provide good opportunities for making short-term gains. However, upon closer inspection of penny stocks, one might be able to find cheap stocks with a strong profile and great market opportunity. Such stocks can prove to be very fruitful in the long term. Given that these stocks are near the lower end of their trajectory, they come with huge upside potential. There is a real possibility that they would blow up in the coming years and bag huge profits for its holders.
Hence, here we have compiled a list of the five best penny stocks under $5 with promising profiles and market opportunities. Investing in these stocks and holding them for the long term just might give your portfolio the boost it needs.
SNDL Inc. (SNDL)
The first penny stock under $5, which we present is a diversified cannabis play, SNDL Inc. (SNDL). Formerly known as Sundial Growers Inc., SNDL is a Canada-based cannabis producer which has extended its reach into the alcohol industry. It now also operates retail pot shops across Canada after going through multiple acquisitions in the past year and a half.
Unable to rely on its organic cannabis production alone, SNDL has been steadily building a highly diversified business. Earlier this year, the company completed the acquisition of Alcanna, which resulted in the addition of the alcohol business to the pot titan. The acquisition also added Nova Cannabis to SNDL, following which the company also acquired Spiritleaf. These acquisitions bumped SNDL’s second quarter revenue by a cosmic 2,344% to 223.7 million Canadian dollars.
SNDL isn’t stopping even after such a giant increase in revenue. The company recently placed yet another all-stock deal to buy cannabis company, Valens, for a total consideration of $138 million. And just today SNDL announced its bid agreement for acquiring Superette assets, which sells cannabis and non-cannabis branded merchandise.
Hence, with healthy long-term investments of 900 million Canadian dollars, and a solid financial footing SNDL seems on the right track. The company is more than capable of becoming one of Canada’s premiere cannabis providers over the course of the current decade. Thus, this stock under $5 could quite possibly deliver huge returns for patient investors. And the near-term price target for SNDL also implies a nice 61.7% upside, according to Wall Street.
Sorrento Therapeutics (SRNE)
Next in line is a healthcare stock, Sorrento Therapeutics (SRNE), which presents both high risk and a high reward opportunity. Sorrento is a clinical-stage biopharmaceutical company in the U.S. The company has a broad product portfolio and a clinical pipeline spanning high-value areas like cancer, pain management, and Covid-19. They also develop therapies for autoimmune and neurodegenerative diseases.
Sorrento’s most valuable product so far is its third-generation cancer drug, abivertinib. The drug is currently in late-stage development for lung cancer and mid-stage development for prostate cancer. Both indications are multibillion-dollar annual drug markets for which the drug has shown positive results so far. Moreover, the company has also received IND clearance for its standalone Covid treatment from both the U.S. FDA and China’s National Medical Products Administration. This is not all, Sorrento’s non-opioid-based pain reliever for acute lower back pain is also on FDA’s fast-track designation.
However, despite such huge developments in its pipeline, there is one concern regarding its cash burn. The company lost $219.5 million in the second quarter of 2022 while it had only $70.3 million in cash and cash equivalents. But the good news is that Sorrento ought to be able to overcome this trouble as long as abivertinib continues its positive progress. The company has many promising products in line to be worried about its cash burn right now.
In fact, Wall Street anticipates the stock to surge by a mammoth 724% over the next 12 months. With such huge upside potential and a promising pipeline, this penny stock under $5 is most certainly a great buy for the long term.
Vivakor Inc. (VIVK)
Up next on our list of penny stocks under $5 is an American company, Vivakor Inc. (VIVK). Vivakor specializes in clean energy technologies and environmental solutions including soil remediation. With the increasing awareness of the need for clean energy solutions, investments are rising in the sector. Thus, the clean energy technology market is growing at a rapid pace and the market opportunity is huge. Overall, the energy industry is seeing some strong tailwinds which are contributing to a huge rise in the energy stock trend.
To capitalize on the growing market opportunity, Vivakor has been busy expanding its portfolio as well as business. The company recently closed Silver Fuels Delhi and White Claw Colorado City purchases for $37.4 million. Both these acquisitions are transformative events for Vivakor. Silver Fuels and White Claw, both have long-term contracts in place, which the company expects would help it achieve significant annual revenue. Both entities also have assets located in two major oil basins in the U.S.
While the stock has yet to break and hold above its 50-day moving average, it has been gaining traction over the past three months. The energy industry is gaining huge popularity and clean energy even more so. And Vivakor is capitalizing well on this market opportunity. All in all, Vivakor presents a great buy right now with the potential to bag huge amounts of profits in the future.
Ambev SA (ABEV)
Next in the line of stock trading under $5 is a Brazil-based brewing company, Ambev SA (ABEV). Ambev has operations in 18 countries in South America and the Caribbean. It produces and distributes beer, soft drinks, and other non-alcoholic beverages.
Given that 62% of the company is owned by Anheuser-Bush InBev, Ambev is essentially a business unit of the world’s largest brewing company. Both the companies have been struggling due to the pandemic, but the reopening tailwinds have put Ambev back on track. However, the macroeconomic conditions have resulted in a considerable rise in commodity prices. But despite this, the brewer has been able to improve margins due to its strong pricing power.
On the financial front, the company is doing pretty well. In the first quarter of 2022, Ambev delivered a 29.1% year-over-year improvement in profits on solid net revenue growth. And in the second quarter net income was $583.56 million, while the net revenue grew by nearly 20%. The organic EBITDA and cash flow also marked a nice improvement of over 17% year-over-year. That’s not all, the company’s “FIFA World Cup” launch could be a strong catalyst for further increasing its sales.
Meanwhile, Ambev’s stock trades at a nice forward price-to-earnings ratio of 11.8. Add to this a dividend yield of 3.6% and you have got a penny stock worth buying for the long term. At a price of just under $3, this penny stock under $5 is worth investing in right now.
The last penny stock trading under $5 on our list is Broadwind (BWEN). Broadwind is one of the leading fabricators of equipment and components across different energy sectors. It covers both renewables and non-renewable, thus, diversifying its offerings in the broader energy industry.
In the renewables sector, Broadwind focuses on wind power. It claims to be one of the first producers of 100-meter wind turbine towers in the U.S. The company recently announced it has landed $11 million in new tower orders from a leading global wind turbine manufacturer. The order is expected to be completed by the first quarter of 2023.
Furthermore, Broadwind came out with total revenue of $50 million in the second quarter of 2022. This marked an increase of just 8% year-over-year due to the slow pace of the wind market. It has been suffering from delays in the renewal of federal production tax credits and higher costs of steel. However, the wind market is expected to recover beginning in 2023. On the other hand, non-wind orders in the quarter surged by over 60% year-over-year. The company’s backlog also showed a nice improvement of over 25%.
All in all, with the renewables market regaining traction and making a recovery, Broadwind is well-placed to capitalize on the opportunity. Therefore, this energy industry penny stock under $5 has great potential to bag some nice gains over the long run.