Penny stocks represent an interesting investment opportunity. These stocks typically represent small companies or companies that are early in the development stages. But isn’t that how you make it big in the stock market?

For example, if you invested $2,000 in NVIDIA (NASDAQ: NVDA) in 2016 when the stock traded for about a dollar per share, you would have over $228,000 today. Then again,  penny stock plays don’t end with this type of success. In fact, it’s arguable that most investments in the penny stock category will end in losses. 

So, how do you find the best penny stock opportunities? One option is to look for penny stocks that analysts strongly believe in. After all, stock market analysts have made it their life’s work to analyze the market for potentially profitable opportunities. So which penny stocks are analysts expecting significant growth out of ahead?

Key Points

• Penny stocks are low-cost stocks that typically represent small, underdeveloped companies. 
• Penny stocks can be risky plays, but they can also produce significant returns. 
• Want to earn more on your investment? Check out what could be the next NVIDIA here. 

Why Are Penny Stocks Risky?

Any time you discuss penny stocks, you’ll hear that these investment opportunities are risky. And that’s true for a few reasons. Most importantly: 

• Early Stages: Many penny stocks are in the early stages of business development. Some may not even have a product on the market yet. As such, they often rely on an inflow of cash from investors to stay afloat until their product becomes profitable. 
• Liquidity: Since penny stocks are deemed risky, there’s less demand for these stocks than for small-cap, mid-cap, large-cap, and blue-chip stocks. As such, they often lack liquidity.  
• Potential Failures: Because the companies represented by penny stocks are typically small, under-funded companies, these companies may fail altogether. It’s also possible for them to fail when their products are released due to a lack of demand. 

Considering these risks, if you decided to blindly buy 10 penny stocks right now, chances are that at least nine of your investments would end with losses. So it’s important to understand these risks and choose wisely when investing in the penny stock category. 

5 Penny Stocks With 250% Or Higher Upside Potential

As mentioned above, one way to choose your penny stocks wisely is to look at the opportunities that analysts expect to grow dramatically ahead. With that said, here are five penny stocks that analysts expect to grow by 250% or more over the next year. 

Lexicon Pharmaceuticals Could Cure What Ails Your Portfolio

Lexicon Pharmaceuticals (Nasdaq: LXRX) is an American biopharmaceutical company that takes a genetic approach to the treatment of serious medical conditions like heart failure, diabetes, obesity, and neuropathic pain. The company’s first FDA approval came on May 26, 2023, with INPEFA, the company’s treatment for heart failure. 

And more approvals could be on the horizon. The company currently has four other potential therapies in its pipeline. Studies surrounding those therapies range from pre-clinical to stage 3. 

While Lexicon Pharmaceuticals isn’t yet profitable, the company’s revenues are growing quickly. So profitability should come down the line soon. In the last earnings report, the company’s revenue grew more than 4,600% year over year, to $1.13 million.

And analysts seem to love the stock. Out of five analysts weighing in on the stock, four rate it a Buy. The other analyst rates the stock a Hold, and there are no sell ratings to speak of. The consensus price target on Lexicon Pharmaceuticals shares is $8.00, representing the potential for 250%+ gains over the next 12 months, and suggesting that LXRX is one penny stock you should consider adding to your portfolio. 

AbCellera Biologics Antibody Science Can Yield Strong Returns

AbCellera Biologics (Nasdaq: ABCL) is another biotechnology play that offers an opportunity that’s hard to ignore. In particular, the company focuses on antibody science, or the use of antibodies to treat or cure medical ailments. 

But it doesn’t operate alone. While AbCellera currently has two preclinical programs in its pipeline, it’s most well-known for its relationships with other companies that use its technology in the production of new therapies. Some of AbCellera Biologics’ most familiar partners include Novartis, Regeneron, Teva Pharmaceuticals, Moderna, and Ely Lilly.

Unfortunately, AbCellera Biologics’ most recent earnings report left a bit to be desired. During the most recent quarter, the company’s revenue was down about 18%, and net income was down just over 1%. However, the company is working on both revenue generation and cost-cutting efforts, which could have a strong impact on earnings in the future. And analysts are expecting incredible growth ahead. 

At the moment, six analysts are weighing in on the stock, all of whom rate it a Buy. The consensus price target is currently $12.20 per share, representing the potential for more than 280% growth ahead. 

Poseida Therapeutics Could Generate Significant Profits Ahead

Poseida Therapeutics (Nasdaq: PSTX) is a clinical-stage biotechnology company. While the company is working to develop therapies for consumers, none of those therapies have been FDA-approved or otherwise approved by regulatory agencies around the world. But that may represent an opportunity, as any approvals could send the stock to the top. 

The company’s pipeline is centered around oncology, or the treatment of cancer. At the moment, Poseida Therapeutics has eight research programs ranging from pre-clinical stages to Phase 1 clinical trials. Should any of these therapies be approved, they all have the potential to become blockbusters. 

As a clinical-stage biotechnology company, Poseida Therapeutics isn’t yet profitable. But its most recent earnings report was impressive. In the most recent quarter, the company’s revenue climbed 172% to over $28 million. And while the company isn’t profitable, its net income was up over 30%. 

Four analysts have shared opinions on the stock, all of whom have rated it a Buy. The current PSTX price target is $14.00, representing the potential for more than 300% growth ahead. 

MeiraGTx Is Another Penny Stock That’s Screaming “Buy Me”

MeiraGTx (Nasdaq: MGTX) is another clinical-stage biotechnology company that is working to develop therapies for serious diseases. The company’s core clinical platforms focus on therapeutics for issues impacting the eye, salivary gland, and central nervous system. 

The company currently has 14 ongoing research programs. Five of those programs have received Fast Track Designation, Orphan Drug Designation, or both. Both of those designations could speed up the company’s time to market for these therapeutics. 

While it can be difficult to gauge a clinical-stage biotechnology company by earnings, it’s important to consider the data. While revenue was down around 79% year over year in the most recent quarter, net income rose over 32%, and diluted earnings per share were up more than 48%. 

Analysts have positive opinions about the stock too. The two analysts who have shared opinions about MGTX rate the stock a Buy, and its consensus price target is $18.50. If those analysts are right, the stock could climb by more than 260% over the next year.  

Tenaya Therapeutics Could Climb Nearly 400%

Tenaya Therapeutics (Nasdaq: TNYA) is a clinical-stage biotechnology company. However, unlike others that focus on a wide range of diseases and conditions, Tenaya is focused on the development of therapeutics for heart disease. 

The company currently has 10 research programs, though four of those programs are focusing on undisclosed assets. Its programs range from preclinical development phases to Phase 1 clinical trials. 

While revenue and earnings were down in the most recent earnings report, the company also reported a 159.93% net change in cash year over year. That strong change in cash suggests that the company has plenty of investor interest to fund its ongoing clinical development programs. 

Analysts obviously believe the company is on the right track, too. All eight analysts who have shared opinions on TNYA stock have rated it a Buy. The consensus price target on the stock is $19.17, representing a nearly 400% potential upside. 

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