Investing

3 Cheap Stocks Under $10 With Massive Upside Potential

Omor Ibne Ehsan

Published: January 9, 2025 12:01 pm

A good chunk of small-cap stocks that have languished for the past three years have finally joined the rally in recent months, and some have managed to deliver almost triple-digit returns. However, “a good chunk” still means that there are good opportunities left in the market. Finding such opportunities can be quite tedious since you’ll have to look very deep into the market to find stocks that are in the right industries and aren’t too overpriced.

We’ve done some of that heavy lifting for you.

24/7 Wall St. Key Points:

• These stocks can turn a small amount of capital into a meaningful amount of money.
• The bull case for these “cheap stocks” relies on a lot of speculation, so there’s no guarantee it will play out.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

I’m specifically looking into stocks under $10 that are relatively cheap right now and could pop next. These may be good candidates for you to rotate some of those profits into, but keep in mind that most small-cap stocks come with loss-making businesses and lots of potential dilution.

MultiSensor AI (MSAI)

There’s good reason to believe that the next step in the AI revolution would be in the industrial and blue-collar sectors. Many people wouldn’t have believed — even just five years ago — if you told them that white-collar workers would be the first to be impacted the most by AI. That said, there is some truth to the fact that white-collar work is still “safe,” considering AI companies have failed to make their models reliable and error-proof. Any sort of code or work done by AI has to be screened over by a human due to errors still being high.

However, companies in the industrial sector — such as warehouse management and manufacturing — have been rushing to automate as much work as possible. This trend toward automation in industrial sectors has opened up opportunities for companies specializing in AI-powered solutions for predictive maintenance and process control. One such company making waves in this space is MultiSensor AI.

They have imaging and sensing technologies with AI-powered software that they can sell to enterprises. The flagship products here — MSAI Cloud and MSAI Edge — use data from sensors to monitor and help automate manufacturing. And the growth has been solid so far.

Year-to-date revenue growth was 57% to $6 million in Q3 2024. It also raised $26.5 million through public and private equity offerings in July 2024 and cash reserves are now at $8.6 million. I still don’t think this company is out of the woods yet in terms of sustainability. It reported an $8 million loss in Q3, so those cash reserves are unlikely to last too long and more funding would be needed. Regardless, you can’t point to many AI startups — if any at all — that aren’t bleeding cash right now.

There is an $8 analyst price target on this stock, which implies roughly 308% upside potential; unlikely to come to fruition, but if it can almost quadruple its revenue next year — as expected by analysts — I do think solid gains may be ahead.

Draganfly (DPRO)

Drones have been everywhere in the news recently, mostly due to country-wide reports of drone/”UFO” sightings. Whatever these sightings may be, they’ve only brought more attention to drone companies — both military and civilian ones.

Draganfly has been focusing on both. The company makes multi-rotor helicopters, industrial drones, and civilian UAVs. It also makes military and law enforcement through the APEX Drone and Commander 3XL platforms. This is a very small company and Q3 revenue came in at just CAD 1.89 million, up 8.9% quarter-over-quarter, with a gross margin of just 23.4% (would have been 32.7% excluding inventory adjustments). The net loss was CAD 200,194.

I think the small size here gives the company a lot of room for growth going forward as even a small contract from an established manufacturer or a defense company can lead to huge gains. Draganfly is expected to see 116% revenue growth next year, and if favorable tailwinds keep coming, I think investors will be comfortable paying more for the stock.

Palladyne AI (PDYN)

The last two stocks in this list were an AI company and a drone maker. Why not both? Palladyne AI (NASDAQ: PDYN) has seen an explosive increase in its stock price in the past year. It was up ~1,100% at one point before a correction.

PDYN stock is probably the riskiest on this list since it is burning the most cash and the top line here has been unpredictable. Revenue declined 52% in Q3 2024 to $871,000. However, I still think it can provide gains if the company can deliver on its promises on time.

Palladyne’s product line includes software for industrial and collaborative robots called cobots and it is currently in the MVP (Minimum Viable Product) phase with commercial launch expected in H2 2024. It achieved “a key developmental milestone with the successful first flight of a third-party small drone that demonstrated the ability to identify and prioritize terrestrial targets of interest and then interface with the drone’s autopilot software to follow the prioritized target autonomously.” The company aims Q1 2025 for commercial release and Palladyne thinks that their drones can “offer some of the same intelligence capabilities” that larger drones — some of which cost many millions — are currently offering.

There’s good reason to believe that since they have secured contracts with the U.S. Air Force and Warner Robins Air Force Base and completed Phase I of a $13.8 million Air Force project.