Top 4 Penny Stocks to Buy Right Now at a Big Discount

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After the pandemic-driven stock market correction in March 2020, expansionary monetary policies supported GDP growth. Easy money policies also ensured ample liquidity for financial markets. Penny stocks went euphoric in the rally after the first quarter of 2020. 

However, with inflationary concerns, tightening liquidity and macroeconomic worries, growth stocks have plunged. Penny stocks have seen a deeper correction as market sentiments dipped. 

Of course, with economic uncertainty, it makes sense to go overweight on blue-chip stocks or defensive stocks. However, some exposure can be considered for deeply undervalued penny stocks. In particular, stocks of companies that have a relatively sound business model. 

Once broad market sentiments reverse, undervalued and non-speculative penny stocks can be market out-performers.

Penny Stocks To Buy Today

This column talks about four penny stocks to buy and hold at current levels. 

Riot Blockchain

Riot Blockchain (NASDAQ: RIOT) has been in a correction mode with a downside of 70% in the last six months. With crypto winter, the correction does not come as a surprise. 

However, the best time to buy a stock is when there is blood on the streets. With strong growth visibility, Riot stock seems undervalued. 

To put things into perspective, Riot reported a hash rate capacity of 4.4EH/s for June 2022. For the month, the company mined 421 Bitcoin. 

With the rapid deployment of miners, Riot expects to increase hashing capacity to 12.6EH/s by January 2023. With multi-fold growth in capacity in the next few quarters, the company is positioned for strong growth in Bitcoin mining. This will translate into top-line growth and cash flow upside. 

Of course, in the near term, Riot is likely to see margin compression. Once Bitcoin reverses, the upside for Riot stock can however be meaningful. 

From a financial perspective, the company reported cash of $113.6 million as of March 2022. Further, with digital assets, the balance sheet is strong and financial growth is unlikely to be a challenge. 

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Overall, Riot stock trades around $5 levels. It would not be surprising to see the stock double in the next 12-24 months. 

Tilray Brands

Cannabis stocks have also been in a correction mode with two primary concerns. First and foremost, regulatory headwinds have delayed the growth acceleration. Furthermore, cash burn implies potential dilution of equity. 

Tilray Brands (NASDAQ: TLRY) has slipped by almost 50% in the last six months. After a deep correction, the stock seems to have bottomed out. 

It’s worth noting that after the merger with Aphria, the company is among the leading cannabis brands in the world. With a strong presence in recreational and medicinal cannabis, the growth outlook seems bright. In particular, if cannabis is legalized at the Federal level in the United States. 

Tilray’s CEO has also chalked out ambitious growth plans. The target is to achieve a turnover of $4.0 billion by 2024. This seems realistic if regulatory headwinds wane. 

Tilray has also been focusing on evidence-backed medicinal cannabis. With a growing market in Europe, the outlook seems bright. It’s also worth noting that the company has reported positive adjusted EBITDA on a sustained basis. With operating leverage, margins are likely to witness further improvement. 

Overall, TLRY stock looks undervalued at current levels of $3.3. Multi-fold returns are likely once cannabis is legalized in the U.S. and Europe. 

Mullen Automotive

The electric vehicle industry has faced near-term headwinds. This includes chip-shortage, inflation, and macroeconomic concerns. However, the long-term outlook for the industry is bright with steady growth in the global adoption of EVs. 

Mullen Automotive (NASDAQ: MULN) is among the undervalued electric vehicle penny stocks to buy for the long term. After a correction of 70% in the last six months, the stock seems to have bottomed out. In particular, with some good incoming news. 

Recently, Mullen Automotive announced that the company has signed an agreement with Amazon’s (NASDAQ: AMZN) delivery partner for electric vehicle cargo vans. Mullen will be delivering 600 EV cargo vans over the next 24 months. 

Mullen has also reduced credit stress with deleveraging. The company recently reduced debt by $17.5 million and has just $11 million in balance sheet debt. There seems to be strong financial flexibility to pursue aggressive growth. 

It’s also worth noting that Mullen has made steady progress related to its solid-state polymer battery. If positive developments sustain on this front, MULN stock is likely to trend higher. At the same time, it’s likely that more orders for vans will be secured in the coming years as commercial and retail EV adoption gains traction. 

Transocean

One way to benefit from higher oil prices is exposure to oil and gas exploration stocks. Considering onshore and offshore rig providers is also a good way to benefit from positive tailwinds for the energy sector. 

Transocean (NYSE: RIG) is among the leading providers of offshore rig services. After a sharp rally, RIG stock has corrected by 36% in the last one-month. I see this as a good accumulation opportunity. 

The International Energy Agency has noted that the oil supply scenario is likely to remain tight. Also, with high geopolitical tensions, it’s unlikely that there will be a big correction in oil even in a recession scenario. 

Specific to Transocean, the company has a robust order backlog of $6.1 billion. This provides clear revenue visibility for the medium-term. Also with new contracts likely at a higher day rate, there is visibility for EBITDA margin expansion and cash flow upside. 

It’s also worth noting that Transocean has 12 cold-stacked rigs. If market conditions continue to improve and these rigs are operational, top-line growth seems likely. 

Overall, Transocean has plans to deleverage in the next few years. As the balance sheet improves coupled with higher capacity utilization, the outlook is bright for this penny stock. 

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