Investing in penny stocks can feel like finding needles in a haystack, and can certainly be an uphill battle for most investors. Different from investing in well-established businesses, you can’t hold your way to profit with most small businesses. However, investing in the right penny stocks can be tremendously rewarding. Smaller businesses can grow very quickly, and their stocks can deliver life-changing gains.
Of course, there is substantial risk involved here. Even the right businesses can get unfairly punished, and be subject to a lot of manipulation. But that doesn’t mean you should shy away from taking advantage of opportunities.
Here are three hidden penny stocks I think are worth targeting, given their significant upside potential and large margins of safety.
Nkarta (NKTX)
Nkarta (NASDAQ:NKTX) is a biopharmaceutical company that develops engineered natural killer (NK) cell therapies to treat cancer. NK cells are a type of immune cell that can recognize and kill tumor cells without prior exposure or genetic modification. Nkarta aims to harness the power of NK cells by engineering them with chimeric antigen receptors (CARs) that target specific cancer antigens.
The company has two lead candidates in its pipeline: NKX101 and NKX019. NKX101 targets NKG2D ligands, which are stress-induced molecules expressed in various solid and hematologic cancers. NKX019 targets CD19, a validated B-cell cancer marker. Both candidates are in Phase 1 clinical trials.
Nkarta is offering deep value at its current price range, considering the massive upside potential of its platform and pipeline. The company has a strong cash position of $323 million as of Q1, which can fund its operations through 2025. The company also collaborates with major biotech industry players, such as Sana Biotechnology (NASDAQ:SANA) and CRISPR Therapeutics (NASDAQ:CRSP).
Nonetheless, investing in Nkarta is not for the faint of heart. The company faces significant risks and uncertainties related to its clinical trials. Plus, it will likely burn through a lot of cash as it advances its candidates through this long development stage.
But, if you are willing to take the plunge and have a long-term horizon, Nkarta could very well be a rewarding investment. Analysts share this sentiment, as they have a consensus price target of $17.83 for the stock, implying a whopping 729.3% upside from its current level.
Harte Hanks (HHS)
Harte Hanks (NASDAQ:HHS) is a customer experience company that provides data-driven marketing solutions for various industries. The company helps its clients connect with their customers across multiple channels. In recent years, Harte Hanks has transformed its business model, shifting its focus from traditional media to digital platforms. Harte Hanks has also divested some of its non-core assets and reduced its debt load, reporting revenue of $47 million for the first quarter of 2023, down 4% year-over-year. The company also posted positive EBITDA and slight losses for the quarter. That said, I believe this decline is temporary.
Naturally, this pick involves a bit more risk due to its small cash position and declining revenue trend. Still, such risks are expected if you’re investing in companies with tremendous upside potential. Pandemic-related setbacks were the primary catalyst driving the stock’s recent decline. However, these factors are temporary and do not impact the company’s prospects in the long run.
Currently, HHS stock is trading at a very low valuation compared to its peers and historical levels. And given the company’s market capitalization of only $43 million and revenue for the trailing 12 months of $205 million, this is a stock with a lot of bad news baked in.
Analysts are also bullish on Harte Hanks’ future growth potential. This stock currently carries a consensus price target of $22, implying an impressive 285% upside from its current level.
LZG International (LZGI)
LZG International (OTCMKTS:LZGI) is an artificial intelligence company that develops innovative solutions for various industries and applications. The company’s flagship product is FatBrain AI, a powerful and easy-to-use platform that enables users to create, train, and deploy custom AI models without coding.
This is another great buy if you are looking for massive upside potential. However, investors should be warned that this is likely the riskiest of the three picks. That’s partly due to the lack of coverage for LZGI stock. Analysts and investors do not widely follow the company. However, the analysts that do see the company’s revenue more than doubling to $104 million in 2024 from $41.7 million in 2023 and profits coming in, which is very optimistic.
Penny Stocks
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Omor Ibne Ehsan did not have (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.