After some volatile trading to start the month of August, the U.S. stock market is regaining its bullish momentum. With the Federal Reserve expected to cut interest rates in mid-September amid signs that inflation is slowing down, investors are hoping the economy is headed for a rare “soft landing,” and investors have rediscovered their appetite for riskier assets.
And when it comes to risky assets, penny stocks are worth discussing. These smaller, lesser-known companies have the ability to capture substantial market share in their field with just one major contract win or patent breakthrough, potentially yielding high returns very quickly. However, these stocks also carry high risks, as the companies are often unprofitable or even pre-revenue, which makes penny stock investing suitable only for investors who understand the risks and are comfortable with the potential losses.
Considering this, here are three top-rated penny stocks to consider as Wall Street re-enters “risk on” mode. All three are trading below $5 per share, with “Strong Buy” consensus ratings from Wall Street and at least 24% upside potential to their average price targets.
#1. Aquestive Therapeutics
Based in New Jersey, Aquestive Therapeutics (AQST) is a small-cap player in the pharmaceutical industry, known for its unique drug-by-drug approach using its proprietary PharmFilm technology. This innovative technology enhances drug delivery to meet specific product profiles and clinical objectives. The company focuses on developing medications that tackle significant healthcare challenges, and is involved in advancing a late-stage proprietary product pipeline aimed at treating central nervous system disorders.
Valued at $392.3 million, AQST shares have surged more than 120.7% year to date, significantly outperforming the broader S&P 500 Index's ($SPX) gain of 18.1%.
Aquestive Therapeutics has demonstrated robust fundamental growth, as evidenced in its recently reported Q2 earnings, where it topped Wall Street's expectations. Its revenue for the quarter was $20.1 million, up 52% from the previous year to surpass analysts' expectations by $7.2 million. This substantial revenue growth was primarily driven by its license and royalty segments, particularly with the recognition of deferred revenues after the termination of certain licensing and supply agreements. Moreover, there was notable progress in their research and development activities, especially with their Anaphylm and Libervant products, which are designed to meet critical healthcare needs.
In Q2, Aquestive reported a gross profit of $15.7 million, nearly doubling from the previous quarter. Impressively, the company managed to reduce its net loss from $5.8 million to $2.7 million, marking a significant improvement of 52.6% year-over-year. AQST reported a loss of $0.03 per share, significantly narrower than forecasts for a loss of $0.11.
AQST has received a "strong buy" rating from 7 Wall Street analysts in coverage, with six "strong buy" recommendations and one "moderate buy" rating. The average price target for AQST is $9.43, suggesting a potential upside of over 111% from current levels.
#2. TeraWulf
Based in Maryland, TeraWulf (WULF) is a leading cryptocurrency mining company committed to producing Bitcoin (BTCUSD) using over 95% zero-carbon energy resources, such as nuclear, hydro, and solar, focusing on environmentally sustainable and low-cost power to support high-performance blockchain networks.
Valued at $1.6 billion by market cap, shares of TeraWulf have rallied over 105% year to date, and are up 137% during the past 52 weeks.
On Aug. 14, TeraWulf reported mixed Q2 earnings results. Quarterly revenue more than doubled year over year to $35.5 million, edging past forecasts, but the reported loss of $0.03 per share missed estimates by a penny. Gross profit (exclusive of depreciation) also more than doubled, rising to $21.7 million from $10.3 million in the year-ago quarter, with a GAAP profit margin of 60.9%.
The total value of bitcoin self-mined was $46.1 million, sharply higher than $24.9 million last year, while the power cost per self-mined BTC spiked to $22,954 per BTC from $6,688 per BTC a year ago, largely due to the April 2024 halving.
Turning to the balance sheet, TeraWulf made significant growth in debt reduction, paying off $30 million and an additional $75.8 million in July 2024, eliminating its debt well ahead of schedule.
Additionally, the company has made significant operational expansions. The completion of Building 4 at Lake Mariner has increased TeraWulf’s capacity to 245 MW and over 10.0 EH/s across its two sites in New York. Moreover, construction began on Building 5, which is expected to add an additional 50 megawatts to its infrastructure by 2025. This expansion further solidifies TeraWulf's position as a leader in the Bitcoin mining industry.
WULF has a consensus "strong buy" rating, with 6 analysts calling the stock a "strong buy" and one suggesting a "moderate buy." The average 12-month price target for TeraWulf stock is $6.14, suggesting a potential upside of 24.5% from its current price.
#3. Planet Labs
Based in San Francisco, Planet Labs (PL) is a geospatial data company specializing in designing, building, and deploying satellite constellations that deliver high-frequency geospatial data globally through its web-based platform. The firm offers a diverse range of services, including continuous planet monitoring, base maps, targeted tasking, and analytical tools that provide insights into planetary variables. It serves sectors including agriculture, mapping, energy, forestry, finance, insurance, and government.
Valued at $744.3 million by market cap, PL stock has shed 16.7% of its value over the past 52 weeks, though the shares are up 10.9% so far in 2024.
Planet Labs has established a strong reputation in the satellite data sector through strategic contracts and partnerships with significant entities like the Naval Information Warfare Center and Alphabet's (GOOGL) Google. By integrating artificial intelligence (AI) to enhance data analytics, the company has expanded its capabilities in maritime monitoring and broadened its data offerings on major cloud platforms, enhancing its industry prominence.
On Aug. 19, Planet Labs secured a pivotal contract with the NATO Communications and Information Agency. Under this agreement, Planet’s SkySat satellite imagery will be integrated into NCIA's Alliance Persistent Surveillance from Space program, supporting NATO missions. This collaboration underscores Planet Labs' expanding role in global security and defense strategies, leveraging their advanced satellite capabilities to enhance situational awareness and operational readiness internationally.
In fiscal Q1 of 2025, Planet Labs reported record quarterly revenue of $60.4 million, up 15% from the year-ago period, while its adjusted EBITDA loss narrowed to $8.4 million, or $0.05 per share. The results beat Wall Street's expectations. PL ended the quarter with $276 million in cash, cash equivalents, and short-term investments.
For the current quarter, set to be reported in early September, PL expects revenue to range between $59-$63 million, with capital expenditures projected between $14-$17 million.
Analysts are optimistic about PL stock, with a consensus "strong buy" rating. Out of the 11 analysts covering the stock, 8 have a "strong buy" rating, 1 has a "moderate buy," and 2 suggest a "hold" rating.
The average 12-month price target of $4.42 suggests that Planet Labs stock has 61.3% upside potential from current levels.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
