When you hear about penny stocks, what comes to mind? Based on the formal definition, we’re talking about cheap stocks trading under $5. But don’t get things confused. Just because we’re talking about lower-priced equities, it doesn’t discount that these companies have some value. Whether you’re talking about mining stocks, biotech, or even consumer cyclical, penny stocks tend to beat to the sound of their own drum.
Take, for instance, what we’ve seen in the stock market this week. Broader trends in the S&P and Nasdaq saw mainly growth stocks taking a beating. Does this mean that was the case for all companies with exposure to things like tech? No, and we actually saw several penny stocks going starkly against this trend. One example of this was the former penny stock Regional Health (NYSE: RHE).
While the healthcare sector was getting hit following news of a potential issue with vaccine IP, RHE stock soared to new record levels. This was a clear demonstration of how penny stocks don’t necessarily react to general market trends. Again this isn’t something that all stocks under $5 experience, and plenty are getting caught in secular trends. An example of this is what we’ve seen with certain energy stocks and commodities. These sectors can and have been influenced by certain market trends.Robinhood Traders Take A Liking To Penny Stocks
Nevertheless, the beauty of penny stocks is that there are usually plenty to choose from. What’s more, many of these smaller companies go on to “graduate” from these sub-$5 levels. Whether it be a “right place, right time” like we saw with certain vaccine stocks or it’s a company hitting major milestones, another attraction to cheap companies is being able to see a company from its early stages.
No other platform has emphasized this trend more than Robinhood. The mobile-first app attracted millions of new users to it over the last 52 weeks. The platform’s ease of use and access to stocks and cryptocurrencies like Dogecoin has made it an attractive option for new traders.
Despite the continuous tech issues that the application has experienced, it hasn’t deterred most of the app’s users. The one downside is that it restricts access to certain stocks, mainly OTC penny stocks, for example. Regardless, Robinhood has become a vehicle for new traders to gain exposure to the public markets.Penny Stocks You Might’ve Missed
The pandemic was a big driver of momentum for many companies over the last year. Thanks to the big sell-off and the resulting rebound, traditional investors who would’ve never considered penny stocks got a first-hand look at this area of the market. Many leading companies, including countless REITs, travel & leisure, and energy & transportation, slid.
Now, in 2021, with a brand new crop of traders who’ve come into the market, stocks under $5 have gained a bit more legitimacy in the stock market, in general. In this article, we’ll take a closer look at a few former penny stocks that’ve gone on to see some explosive momentum over the last several months.
- GT Biopharma Inc. (NASDAQ: GTBP)
- SemiLEDS Corporation (NASDAQ: LEDS)
- Big 5 Sporting Goods Corporation (NASDAQ: BGFV)
Less than 6 months ago, GT Biopharma was one of the more active penny stocks to watch. In fact, at the start of 2021, shares were trading around $1.30. The company was also an OTC-listed name that gained attention for its novel treatment pipeline and immune treatment platform. Fast-forward to this month, and GTBP stock uplisted to the Nasdaq and has reached highs of $17.48.
Aside from a few bullish analyst ratings, the company has gained momentum as it continues executing on numerous milestones. GT Biopharma’s treatments are based on its TriKE technology. This uses the body’s natural killer cells to build upon the cancer-killing abilities of the immune system. Its lead treatment, GTB-3550, has initially been indicated in acute myeloid leukemia and high-risk myelodysplastic syndromes.
Right now, there’s a 10 patient Phase I/II expansion trial for the treatment. The first 9 patients have shown significant reductions in bone marrow blast levels with no signs of cytokine release syndrome. This syndrome is a general side-effect also referred to as cytokine storm and is a very negative impact from cancer treatments. Given this as the case, however, GTB-3550 has clearly shown potential. In fact, analysts Roth Capital like Tony Butler, have mentioned that “natural killer cell engagers may improve the outcomes in patients with acute myeloid leukemia and perhaps other malignancies.”
Aside from GTB-3550, GT Biopharma has compiled a pipeline of treatments focused on utilizing TriKE technology. The company has also established key industry relationships with the likes of Cytovance® Biologics. The company will be the exclusive GMP manufacturer for three of GT’s TriKE™ therapeutic product candidates under the partnership agreement terms. Among other things, this could give GT Biopharma a unique ability to scale and expand on additional clinical trials rapidly.2. SemiLEDS Corporation (NASDAQ: LEDS)
One of the more recent “graduates” from penny stock levels is SemiLEDS Corporation. As early as this week, LEDS stock was trading under $5. However, over the last few sessions, the former penny stock has managed to mount a strong comeback. In fact, on May 6th, shares reached a high of $13.44 on some of the stock’s biggest volume of the year.
The interesting part of this move is that it came without any apparent fundamental catalyst. This isn’t necessarily a unique event, however. There’ve been plenty of penny stocks that make big moves on seemingly no information. But a look at how these companies conduct business could shed light on whether sympathy sentiment is playing a role. SemiLEDS develops and manufactures LED chips and components for lighting applications.
Last month the company reported fiscal 2021 Q2 earnings, which showed strong performance year over year. Revenue came in at $1.2 million compared to just $719 thousand in the prior quarter. Its GAAP net loss from stockholders also decreased in the second quarter compared to the first. This was even in light of a 2-week shutdown during the quarter in observance of the Chinese New Year.
Given the strength in its second-quarter financials, there could be some things to keep in mind heading into the remainder of the year. The foremost of which is how fiscal Q3 performance holds up to its Q2 trend.3. Big 5 Sporting Goods Corporation (NASDAQ: BGFV)
Another one of the former penny stocks reaching new highs this week is Big 5 Sporting Goods. Believe it or not, BGFV stock was trading under $5 for most of the year last year. The spark that ended up igniting the bigger run came as Big 5 reported stronger earnings for its Q2 2020. This also came with a favorable outlook from management. As they say, the rest is history. Shares of BGFV stock reached a high of $29.24, marking a new all-time high.
This week was another big one for the company. Once again, it came on the back of strong financial results. Not only did results impress the market, but Big Five also gave much more bullish guidance on its outlook for Q2. For instance, the company expects same-store sales in the second quarter to increase to a range of 22%-27%. Big Five expects earnings per share to come in between $1.05 and $1.15 compared to estimates of just $0.38. Earning per share in the first quarter also came in strong at $0.96, which beat the $0.50 estimate. These results have helped give shares a consecutive day boost in the market.
Company CEO Steven G. Miller also gave some bigger news for shareholders saying, ” In light of this strength and to continue to return value to shareholders, our Board of Directors has declared a 20% increase in our regular cash dividend to an annual rate of $0.72 per share and also has declared a special cash dividend of $1.00 per share.”Are Penny Stocks On You 2021 Watch List?
All in all, it’s great to see stocks make big moves. But you can’t forget that even with these massive runs, stocks carry plenty of risks. All penny stocks don’t typically break out thousands of percentage points. However, these are a few prime examples of ones that have moved out of the sub-$5 range.
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