Scores of names in “penny stock territory” (stocks trading for $5 or less per share) go unnoticed among the sell-side community, but that doesn’t mean they are completely off their radar. Alongside these more “under the radar” names, are strong buy penny stocks that have received favorable analyst ratings.
These include ratings from analysts at well-known “bulge bracket” investment banks, as well as analysts from investment banks and boutique research firms more focused on the small-cap/micro-cap end of the stock market.
While blindly following all bullish sell-side recommendations isn’t necessarily a profitable move, these ratings give us a strong idea of some of the best opportunities out there among stocks in this category.
For instance, the seven strong buy penny stocks listed below. Each one has received a “buy” or equivalent rating from a sell-side analyst, and a closer look suggests that the analysts are on the money with their optimistic view of their respective prospects.
Advantage Solutions (ADV)
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As I have argued in prior coverage, Advantage Solutions (NASDAQ:ADV) is one of the best penny stocks out there. Mostly, because of potential improvements in profitability for the in-store marketing company, as inflation eases and labor costs normalize.
I’m, of course, not the only one who sees opportunity with ADV stock. Back in December, analysts at Canaccord Genuity initiated coverage, giving shares a “buy” rating, and a $4 per share price target. In the past twelve months, the market has caught on as well, with the stock surging by more than 74%.
Although Advantage Solutions now trades near Canaccord’s price target, shares may still have further room to run. The stock trades at just 9.3 times forward earnings at current prices. Forecasts also call for earnings to rise by around 14% this year. Higher earnings and a modest re-rating of its valuation could drive another surge.
Core Scientific (CORZ)
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At first glance, Core Scientific (NASDAQ:CORZ) may not seem like a name that should be deemed as being one of the strong buy penny stocks. After all, it was only a little over a month ago that this Bitcoin (BTC-USD) miner exited from Chapter 11 bankruptcy, and resumed trading on the Nasdaq exchange.
Yet while this bankruptcy, not to mention the risky nature of its business suggest making CORZ stock at best a small, speculative position in your portfolio, it may prove worthwhile to take heed of a recent analyst upgrade issued for Core Scientific by analysts at Compass Point.
On Jan. 31, Compass Point raised CORZ from “neutral” to “buy,” citing how the company, post-restructuring, is well-positioned to continue expanding its BTC mining capacity. While not the focus of the Compass Point upgrade, the recent bull market in Bitcoin may be another factor that bolsters the bull case.
Honest Company (HNST)
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Shares in household products maker Honest Company (NASDAQ:HNST) have experienced a strong rebound since last fall. During this time frame, HNST has bounced back by more than threefold off its lows. Yet while that may suggest that the stock has gone from undervalued to fairly-priced, you may want to think otherwise.
At least, based upon the latest HNST stock sell-side rating. Earlier this month, analysts at Alliance Global Partners gave shares a “buy” rating, and a $5.75 per share price target. This suggests potential upside for HNST of more than 60%.
This aggressive price target, may be well-within reach. As seen in recent fiscal results, Honest Company has continued to implement its “transformation initiative,” which has resulted in improved margins, narrowing losses, and a potential path to consistent profitability.
As noted previously, Honest could eventually attract the interest of a strategic buyer in the household products space.
Pagaya Technologies (PGY)
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Pagaya Technologies (NASDAQ:PGY) is a fintech firm that uses AI-powered proprietary software to price and underwrite loans. Shares have benefited little from the recent waves of “AI mania,” but I’m not the only one that has identified the long-term opportunity with Pagaya.
In December, Jeffries analyst John Hecht initiated coverage on PGY stock. Giving shares a “buy rating,” and a $2.50 per share price target, Hecht cited many factors pointing to high growth and higher prices for Pagaya. Namely, the company’s use of an asset-backed securities (or ABS) pre-funding model to finance loan growth.
While PGY has traded sideways since the Jeffries rating, recent quarterly results suggest that the company is on track to hit earnings forecasts for 2024 (14 cents per share) and 2025 (22 cents per share). Not too shabby, for a stock changing hands at around $1.50 per share as of this writing.
Rocket Lab USA (RKLB)
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Rocket Lab USA (NASDAQ:RKLB) was once a popular “meme stock,” but more recently shares in this rocket launch services company could be better described as being a penny stock out of favor with investors.
However, this hasn’t stopped Citigroup from resuming coverage of RKLB stock. As InvestorPlace’s William White reported on Feb. 12, Citi analysts issued a new “buy” rating, and a $6 per share price target for Rocket Lab USA. In the bullish research note, the lead analyst (Jason Gursky) cited improved liquidity and the winning of a large contract with the Space Development Agency as factors behind his bullish view on shares.
With the company still working to become profitable, it’s far from certain when (or if) RKLB will climb to Citi’s price target. However, if you take a deep dive into RKLB yourself, and determine it’s worth the risk, buying now could prove profitable in hindsight.
Sabre (SABR)
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Sabre (NASDAQ:SABR) is a legacy provider of back-end technology services to the travel sector. Given its pandemic-era challenges and high debt, this is another name where you may question its status as one of the strong buy penny stocks.
Yet while I have my own reservations about its merits as a penny stock opportunity, several analysts are bullish on SABR stock. These include analysts at BofA, which in January raised their rating to “neutral,” and their price target from $3.50 to $5 per share.
More recently, Cantor Fitzgerald initiated coverage of SABR, rating it “overweight” (equivalent to “buy), with a $5 per share price target.
In its bullish rating, Cantor Fitzgerald cites the strong potential for significant cost savings starting in 2025, new product launches, and the plowing of the resultant increased cash flow into debt reduction efforts all as factors that could send SABR flying high again.
Safe Bulkers (SB)
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Safe Bulkers (NYSE:SB) is another penny stock that has earned a bullish rating from analysts at Jeffries as of late.
As Seeking Alpha reported on Feb. 27, Jeffries upgraded shares in the dry bulk shipping firm from “hold” to “buy,” giving the stock a $6 per share price target.
In the upgrade, Jeffries’ Omar Nokta cited valuation as a key reason SB stock is a buy at current levels. The shares trade at a discount compared to their peers. There is also a powerful catalyst in play with Safe Bulkers: the company’s aggressive share repurchase program.
Per Nokta, the repurchase of as much as 5 million shares could provide a serious boost to the Safe Bulkers stock price. SB has zoomed higher on the heels of the upgrade. Now approaching the “penny stock ceiling” ($5 per share), hitting the Jeffries price target could happen sooner rather than later.
On the date of publication, Thomas Niel held Bitcoin. He 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.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
