Investors are weighing easing inflation and the start of the earnings season with one key question in mind: when will the Federal Reserve move to lower interest rates? Meanwhile, positive sentiment continues to surround the broader markets, including several penny stocks that are riding the bullish wave.

While penny stocks are smaller than mainstream companies, and many are not yet profitable, they are a way for investors to own many shares without breaking the bank. However, investors should also consider that they have the option for fractional ownership of larger, more established companies whose stocks exhibit less volatility and risk. With this in mind, we have identified a trio of penny stocks that are off to the races so far in the month of July.

Arcadium Lithium: New Entity

With a market cap of $3.7 billion, Arcadium Lithium (NYSE: ALTM) is bigger than many other penny stocks. However, at $3.53 per share, ALTM stock trades within the penny stock threshold of below $5 per share. The stock has raced ahead by 6.3% so far in July, including a 4% gain on Thursday.

Arcadium was born as a result of a combination between Livent and Allkem to become one of the top-three producers of downstream lithium chemicals excluding China. Lithium is a key resource in the global transition to clean energy and a more sustainable future. The company is engaged in the complete value chain, from lithium as a resource to battery-grade lithium chemicals, producing performance lithium compounds across jurisdictions in a safe way.

In Q1, Arcadium reported revenue of $261 million and GAAP net income of $15.6 million. Arcadium is in the midst of a cost-cutting initiative in which it is reducing its workforce by 11% with the view to achieve cost savings of between $60 million and $80 million in 2024. Wall Street analysts are split between “buy” and “hold” ratings on ALTM stock, with an average price target of $5.89 per share, suggesting the stock has 62% upside potential.

Olaplex Holdings: ‘Reset Year’

 

With a market cap of $1.1 billion, Olaplex Holdings (Nasdaq: OLPX) trades for $1.70 per share. The Olaplex brand is associated with hair care products, but it is not without controversy. The company is the target of a lawsuit in which nearly three-dozen women claim Olaplex products caused them problems, including hair loss as well as dry and brittle hair as a result of the chemicals used in the company’s hair care line.

The stock has advanced 9.6% so far in July amid Olaplex’s reported “reset year” as the company seeks to restore its damaged reputation. Olaplex recently announced changes to its leadership team, including the addition of two experienced consumer brand industry executives. Catherine Dunleavy, a Nike and Comcast alum, was tapped for the dual role of COO and CFO. Additionally,  Katie Gohman, who hails from L’Oréal and Ralph Lauren, was hired as the new chief marketing officer. Investors have rewarded the stock since Olaplex unveiled its new C-Suite lineup.

In Q1, Olaplex’s net sales fell 13.1% to $98.1 million across its professional, specialty retail and direct-to-consumer segments. Most Wall Street analysts who cover Olaplex stock have a “hold” rating attached with an average price target of $1.88 per share, reflecting upside potential of approximately 10%.

Thoughtworks Holding

With a market cap of $868 million, tech consulting firm Thoughtworks Holding (Nasdaq: TWKS) trades for $2.69 per share. While the stock is down 5.6% in the month of July so far, it has recently reclaimed lost ground. Since falling to $2.37 per share on July 9, TWKS stock has gained 13%, which has captured the attention of investors. Thoughtworks fell back into penny stock territory after trading above $5 as recently as January.

Thoughtworks is a tech consultancy firm that combines strategy, design and software engineering for its clients, participating in trendy areas like AI, electric vehicles (EVs) and the cloud. The company is operating in what management described as a “challenging macroeconomic environment” and is undergoing a corporate restructuring, though customer bookings appear to be on the upswing. Thoughtworks recently suffered an executive shakeup when CEO Guo Xiao announced his resignation. The board has since appointed Mike Sutcliff to the helm.

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