After four long years of volatility and economic uncertainty, there finally appears to be light at the end of the tunnel heading into 2024. As rates start coming down and monetary policy loosens, we could see significant tailwinds for beaten-down penny stocks primed for a rebound.
Penny stocks tend to thrive when monetary policies favor economic expansion and easy money. However, the past few years have been the exact opposite, with quantitative tightening, balance sheet contraction, and restrictive monetary policy the story driving markets lower for speculative assets. This toxic environment led penny stocks to underperform the broader market dramatically, and is a narrative many investors hope will change.
But the tide appears to be turning. The Federal Reserve is projected to cut rates in the first half of 2024 to support a continued economic recovery. Barring any major shocks or recessions, this policy shift and stabilizing growth outlook could unlock tremendous upside potential for penny stocks this year.
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It’s crucial to stress upfront that these are highly-speculative bets. Penny stocks carry substantial risk, and their upside projections should be taken with a grain of salt. However, the risk-reward ratio on these opportunities looks increasingly compelling for investors with risk tolerance. Here are the three penny stocks to look into right now.
Palatin Technologies (PTN)
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Generally, I steer clear of biotech penny stocks. That’s because their risk-reward is usually not compelling enough for my liking. However, I think Palatin Technologies (NYSEMKT:PTN) could be an exception. This clinical-stage pharma company focuses on developing drugs that harness the power of melanocortins to reduce inflammation, a root cause underlying countless diseases.
Palatin currently has Vyleesi, a treatment for hypoactive sexual desire disorder in premenopausal women, already approved by the FDA. While awaiting additional licenses to sell Vyleesi, Palatin is advancing a promising pipeline targeting indications spanning ophthalmology, gastroenterology, and nephrology. Phase 3 trials are underway for PL9643, a potential dry eye disease therapy. Preclinical activities are ongoing for PL9654 to potentially treat diseases like diabetic retinopathy. Phase 2 trials are also progressing for PL8177 in ulcerative colitis and another melanocortin receptor agonist in diabetic nephropathy. The versatility of the melanocortin platform extends far beyond what Palatin is currently pursuing.
However, the company only has $5.5 million in cash reserves, which is concerning. Dilution risks are moderate in the near-term, as the company will likely need to raise additional capital. But if Palatin can tread water until rates decline, which will provide a better financing environment, the long-term outlook for this company seems bright.
Profitability is expected by 2026, with rapid earnings growth anticipated to follow. If everything goes right, 2029 earnings per share projections peg Palatin’s forward price-earnings ratio at just 0.35-times, an incredible bargain. Hitting $528 million in estimated 2029 revenue would mark an upside over 14x from today’s market cap. Granted, that entails a lot going right. But for a penny stock, 2,000%+ implied upside per the $60 average price target is worth the risk.
FiscalNote (NOTE)
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Shifting focus away from biotech, FiscalNote (NYSE:NOTE) offers a safer way to chase outsized penny stock returns as policies improve in 2024. This data analytics provider equips users with insights to better understand and act on regulations and policymaking activities. Unlike most penny stocks hemorrhaging cash, FiscalNote has grown sales at a steady clip. But admittedly, the company’s losses have still been rather extreme.
Thankfully, the bleeding is slowing. Losses are projected to narrow this year as double-digit revenue growth persists. I believe NOTE stock has bottomed out after its recent pounding.
The addressable market for regulatory and policy data is enormous. While FiscalNote currently occupies a very niche corner, its client base can include many Fortune 100 companies and government entities struggling to manage copious volumes of hard-to-track data. With room to expand both geographically and into adjacent verticals, FiscalNote’s $122 million market cap nearly matches its run-rate annual revenue. As profitability initiatives gain traction, the risk-reward looks far more balanced today than six months ago. The consensus price target of $3.9 implies 315% upside for this penny stock over the next year.
ClearSign Technologies (CLIR)
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Rounding out my list of penny stock picks is ClearSign Technologies (NASDAQ:CLIR), an emissions-reduction play benefitting from intensifying climate change activism. This company has patented burner technology that can eliminate over 80% of NOx and CO emissions in furnaces and boilers, without costly catalysts or ammonia injection. The system enhances flame geometry, temperature, and stability for optimal combustion.
While ClearSign has negligible sales today, positioning it firmly as a “show me” story, the market opportunity is immense. Capturing even a fraction of the company’s potential total addressable market would reward investors handsomely. ExxonMobil (NYSE:XOM), Honeywell (NASDAQ:HON), Shell (NYSE:SHEL), and other industry leaders are already working with ClearSign to pilot test implementations. These partnerships provide strong external validation.
ClearSign is expected to post $1.9 million in 2023 sales, up 406% year-over-year. Growth is expected to continue scaling, with $5.8 million projected this year and $25 million in 2025. Profitability could be attained by 2025 as well. If 2027 earnings per share projections materialize, CLIR stock will trade at 2.4-times earnings. That’s dirt cheap! The $6 analyst price target puts the stock’s upside potential at 440%.
Penny Stocks
On Penny Stocks and Low-Volume Stocks:With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand thatInvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More:Penny Stocks —How to Profit Without Getting Scammed
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.
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