Amidst the current market volatility, penny stocks are back on investors' radar again. Generally used to refer to shares of companies trading under $5.00 each, penny stocks offer a speculative opportunity with the potential for substantial returns at an affordable price point. If the stock break out, it has the potential to take investors' portfolios to the next level with outsized gains. There's also substantial risk involved with penny stocks, as not all of these companies will turn out to be the next Apple (AAPL) or Amazon (AMZN); however, the lower price point can help investors to keep their exposure to these stocks to a reasonable level that won't break the bank.
With this in mind, here are three top-rated penny stocks from a diverse group of industries - space exploration specialist Intuitive Machines (LUNR), biotech play Sangamo Therapeutics (SGMO), and silver miner Silvercorp Metals (SVM) - that Wall Street expects to deliver significant returns in the year ahead. All three stocks are trading below the $5 mark, with at least 65% upside potential to their average price targets from analysts.
#1. Intuitive Machines
Based in Houston, Intuitive Machines (LUNR) is a space company that offers products and services to facilitate ongoing robotic and human space exploration initiatives. Intuitive Machines provides access to the lunar surface and offers lunar orbit delivery and communication services. Its space systems and infrastructure empower scientific studies and human ventures, harnessing lunar resources to maintain a sustainable human presence on the moon.
Valued at $451 million, shares of LUNR have soared 46% year to date, blowing past the S&P 500 Index ($SPX) with its gain of 12%.
The company is emerging as a top leader in the space industry, bolstered by its solid partnerships. As part of the NASA Artemis program, Intuitive Machines has utilized its role in the CLPS (Commercial Lunar Payload Services) and VLT (Volatiles Investigating Polar Exploration Rover) initiatives to establish itself as a leader in lunar exploration technology.
In February 2024, the company proved this leadership by landing a spacecraft on the moon and completing the IM-1 mission. This mission, supported significantly by collaboration, underscores Intuitive Machines' crucial role in advancing the frontiers of space exploration.
In early 2024, the European Space Agency and the Japan Aerospace Exploration Agency joined forces with Intuitive Machines to enhance the functionality of the lunar lander, pooling $50 million and exchanging technological expertise as part of the collaboration.
Continuing its growth trajectory, Intuitive Machines successfully secured $300 million in a Series C funding round spearheaded by Space Capital in 2024. This significant financial injection is earmarked for the development of the Nova-C lunar robot and for accelerating autonomous lunar navigation research, underlining the commitment to advancing its technological capabilities in space exploration.
Turning to financials, the company has consistently shown impressive revenue growth in the revenue sector in the last 5 quarters, fueled by several projects and missions. Indeed, within the next 10 months, Intuitive Machines is set to deploy and land two additional spacecraft on the moon for NASA.
For fiscal year 2024, the company expects revenues of $200 million to $240 million. With $73.1 million already secured in Q1, the company is on track to meet or even meet these figures, especially with additional revenues anticipated from NASA contracts and other commercial engagements.
Similarly, LUNR is expected to report full-year GAAP EPS of $0.30 for 2024, reversing its 2023 loss.
Wall Street analysts are quite bullish on the prospects for LUNR stock. They have a consensus rating of "strong buy" with a mean price target of $9.80 for the next 12 months, which reflects an upside potential of more than 163%.
#2. Sangamo Therapeutics
Based in California, Sangamo Therapeutics (SGMO) is a biotechnology company that specializes in genomic medicine. The company develops gene therapies using its proprietary zinc finger technology, which targets a variety of severe diseases. Their clinical programs include treatments for neurodegenerative diseases and other serious conditions that currently have limited treatment options, like hemophilia A, Fabry disease, renal transplants, and sickle cell. The company has a market cap of $211.6 million.
SGMO struggled in 2023, losing 82.8% of its value to close below $1.00 per share. However, the company has rebounded in 2024 with an impressive gain of 102% year to date. This strong upward movement is primarily driven by recent acquisitions and positive results from a Pfizer (PFE)-led Phase 3 trial of a hemophilia A therapy co-developed by Sangamo, which has bolstered confidence in its financial outlook and therapeutic capabilities.
The company recently announced its Q2 earnings, which missed top- and bottom-line estimates. Sales came in at $356,000, missing estimates by $7 million. This shortfall primarily resulted from lower-than-expected revenue contributions from their clinical programs. On an adjusted basis, SGMO lost 17 cents, which narrowly missed analysts' expectations.
However, SGMO stock recovered from its earnings miss quickly, driven by the announcement of a licensing agreement with Genentech of around $1.9 billion to collaborate on developing in innovative genomic treatments for neurodegenerative conditions. Under the terms of the agreement, Sangamo Therapeutics is set to receive $50 million in immediate license fees and milestone payments from Genentech. Additionally, it stands to earn up to $1.9 billion in further milestone payments spanning development and commercialization, plus tiered royalties from net sales resulting from medicines.
Overall, analysts have a consensus rating of “moderate buy” for SGMO stock. The average 12-month price target of $3.80 suggests a 245% upside potential from the current price.
#3. Silvercorp Metals
Based in Canada, Silvercorp Metals (SVM) is a leading mining company that specializes in producing silver (SIU24), gold (GCZ24), lead, and zinc. The company is involved in the acquisition, exploration, development, and mining of precious and base metal mineral properties, and operates several mines located in the Henan, Guangdong, and Hunan provinces of China.
Silvercorp Metals is committed to efficiency and employs cutting-edge technology and sustainable methods. These practices reduce environmental impact and ensure workforce safety, setting industry standards in responsible mining.
Valued at $563 million, shares of Silvercorp Metals have rallied over 21% year to date, outshining the broader market.
Earlier this year, Silvercorp unloaded its stake in Ore Corp, selling its 15% interest in the company to Perseus Mining. Since then, the company announced the completion of its Adventus Mining acquisition, underscoring Silvercorp's strategy to enhance its portfolio and solidify its standing in the global mining sector.
Silvercorp has also demonstrated robust financials, further bolstering its market position and enhancing the company's value. On July 15, SVM reported record fiscal first-quarter revenue of $72 million - up 20% year over year, even as production of silver, lead, and zinc all decline on lower head grades and lighter ore processing. Silvercorp's full quarterly results are due out this week, after the market closes on Tuesday, Aug. 13.
Looking ahead to fiscal 2025, Silvercorp Metals has set ambitious production targets, expecting significant increases across all metals, which indicates confidence in continued operational efficiency and market positioning.
Wall Street analysts have given SVM a consensus “strong buy" rating, with an average price target of $5.32, which suggests a 66% upside potential from the current stock price.
