It’s been a tough start to the week for most Robinhood penny stocks. The Nasdaq notched a third straight day in the red on Wednesday.
Once again, mounting inflation concerns spooked investors. Wednesday morning’s Consumer Price Index (CPI), a common measure of U.S. inflation, rose 4.2% marking the biggest increase since 2008. The market was braced for a 3.6% jump so the steamier than expected reading kept the market in selloff mode.
Much of the increase stems from a 50% year-over-year surge in gasoline prices. The recent ransomware attack on the Colonial Pipeline has only fueled worries about energy costs.
Why does this even matter?
The Colonial Pipeline’s more than 5,000-mile wingspan transports nearly half of all gasoline, diesel fuel, jet fuel, and heating oil that is consumed in the eastern United States. With most of the system offline since Tuesday, the impact on U.S. fuel supply has been significant.
It has also led to panic buying of gas across many states and snarled traffic. The national average gas price is quickly approaching $3.00 a gallon and many are worried it will spike much higher.
Despite pleas to avoid panic buying, many aren’t heeding the warning.
Similarly, the market is largely ignoring the Fed’s stance that the recent spike in inflation is only “transitory” in nature.
Given where we started at the depths of the pandemic recession, the inflation levels we are currently seeing are likely to be fleeting. Stockpiling demand and supply chain pressures should only get better as vaccination progresses. Eventually, inflation will subside as the Fed is implying, but that has fallen on deaf ears.
As we’ve seen time and time again, a bout of market shortsightedness can be a great buy opportunity for long-term investors.
This is especially the case in penny stock investing. When the broader market pushes Robinhood penny stocks lower, it sets investors up for some bigger percentage gains.
There are also stocks that ‘zig’ when the market ‘zags’. Today we are going to focus on four such Robinhood penny stocks. All have trended lower since February 2021 but in recent days have bucked the market trend—and re-energized social media.
ROBINHOOD PENNY STOCKS TO WATCH #1 NBEV
NBEV is on the move after it announced record first-quarter results.
Sentiment on the stock turned bullish after it reported a 97% increase in revenue. Most of the gain was due to the addition of sales from the newly acquired ARIIX business. Even so, the $125.5 million in revenue was impressive because it represented 12.5% organic growth, i.e. the growth NBEV would have posted had ARIIX been part of the company in the prior-year period.
It’s good to see ARIIX making an immediate impact on profitability. The company was brought on board to enhance NBEV’s direct selling capabilities and nutritional performance offerings. ARIXX is expected to generate additional cost synergies in future quarters.
Although NBEV reported a $3.5 million net loss, EBITDA swung to the plus side and the gross margin expanded from 65% to 70%.
CEO of NBEV, Brent Willis, said, “The first quarter saw accelerated top and bottom-line results as we focused on converging ARIIX and driving organic growth within our direct/social selling division. This on-trend, direct-to-consumer route to market is led by our hundreds of thousands of exclusive global Brand Partners using our social selling technology to disrupt the industry. Our direct/social selling business experienced a year-over-year sales increase of 128% in the quarter, fueled by record growth in Western Europe, Mexico, and the United States.”
NBEV is a Denver-based beverage company with a rather unusual business model. It relies heavily on “social selling” and independent distribution to make money from its lineup of organic drinks and snacks. This approach has become increasingly popular in recent years and accelerated during the pandemic. Many packaged goods companies have pivoted to outside-the-box methods of getting their products into the hands of consumers. NBEV’s Social Selling Network has grown to over 400,000 micro-influencers and brand partners.
In addition to the strong start to the year, NBEV investors were energized by management’s commentary about the potential for more value-added acquisitions. The health-focused beverage market is highly fragmented with many small players clamoring for a piece of the action. This gives financially fit companies like NBEV a chance to bring in other businesses that can expand their product portfolio and geographic reach.
In early March 2021, NBEV announced plans to acquire Japanese direct seller Aliven. Aliven offers a range of skincare and nutritional products that fit well with NBEV’s targeted demographic. The deal is expected to add $20 million in revenue and $3 million in EBITDA annually.
The price tag for the Aliven purchase was not disclosed but NBEV should have cash left over for other take-outs. It exited the quarter with $102 million of cash versus $33 million of debt.
NBEV may have hit a bottom this week. There appears to be good momentum in the business and the stock looks poised for a healthy run.
ROBINHOOD PENNY STOCKS TO WATCH #2 SNDL
We showcased SNDL back on January 12th soon before the stock skyrocketed to almost $4.00. That article can be found here.
After surging in the days following President Biden’s inauguration, cannabis-related stocks have quickly fallen out of favor with the market. SNDL has returned to the sub-dollar level.
But after slipping as low as $0.69 on May 11th, SNDL appears to be at an inflection point. The recent uptick has been low on volume but high on social media chatter.
The buzz began last week after SNDL announced an interesting acquisition. It entered an agreement to acquire Inner Spirit Holdings for $131 million. Inner Spirit runs a franchise-based network of 86 Spiritleaf cannabis retail stores. Spiritleaf, Canada’s largest single-brand cannabis retailer, plans to cross the 100-store mark this summer. This deal is expected to close early in the third quarter of this year.
The Spiritleaf buyout is a step in a different direction for SNDL. It has historically focused on craft cannabis production and owns a portfolio of popular brands like Grasslands, Palmetto, and Top Leaf. Branching out into the world of retail is a bold move. It could significantly expand SNDL’s product distribution and make it a bigger name in the Canadian cannabis market.
The talk on social platforms gathered steam this week after SNDL reported a solid first-quarter performance. For the first time ever, operating earnings finished on the plus side. The $1.7 million figure marked a sharp contrast to the $32.7 million operating loss in the first quarter of last year. It was also the first time SNDL posted a positive adjusted EBITDA.
These highlights caught the market’s attention and largely overshadowed the 30% drop in revenue. This was mostly associated with lower Canadian cannabis flower prices amid ongoing COVID-19 headwinds. Vape cartridge, oil, and concentrates sales also declined.
It is, however, encouraging that management is sticking to its guns in not pursuing market share gains at the expense of profitability. Rather than sell when prices are down, SNDL is prioritizing its bottom-line performance and waiting for better times.
SNDL is in a good position to weather the current storm given its financial position. It has nearly $1 billion of cash and no debt. As market conditions improve, it will be in a good spot to pounce on growth opportunities and capitalize on a more favorable price environment.
SNDL has a big growth opportunity as a growing player in Canada’s $2.6 billion recreational cannabis market. It’ll be interesting to see how its foray into retail plays out. If it can demonstrate to investors that the move is paying off, credibility could rise and the stock could climb to new highs.
ROBINHOOD PENNY STOCKS TO WATCH #3 PTIX
There was an interesting development in PTIX this week.
The little-known $36 million biotech company has been a frequently delisted stock over the years. Yet it was able to stage a dramatic reversal of fortunes on April 29th when it closed on a $13.2 million public offering and uplisting to the Nasdaq.
The PTIX “units” were offered at $4.15. This bundled offering came with one share of common stock and one warrant. The warrant gives the holder the ability to purchase another PTIX share at an exercise price of $4.98 and expires after a five-year period. So, in effect, PTIX unitholders have a second share in their back pocket which becomes attractive to execute if PTIX climbs above the $4.98 level.
The unique offering and Nasdaq promotion have put PTIX in the crosshairs of a whole new set of penny stock investors looking to get in on the ground floor.
PTIX is looking to turn neuro-active peptides into therapeutics for addiction, anxiety, depression, and other disorders.
Since hitting the Nasdaq, the stock got off to a slow start and dipped below $2.00. Those that took a chance on PTIX were far from depressed after seeing the stock go from $2.13 to as high as $4.89 on May 10th.
Volume on the thinly traded stock has been incredibly bullish. Over a two day-period, more than 128 million shares were traded. Some have speculated that a short squeeze was at play. This is certainly plausible given the number of people that likely lined up to bet against PTIX.
Investors have heard very little from PTIX over the years. Only a handful of press releases have hit the wire since 2017.
But after the uplisting, more penny stock investors will have their eyes on PTIX. Based on the recent volume, even minor news around the progress of its platform could spark a major rally.
ROBINHOOD PENNY STOCKS TO WATCH #4 ZOM
ZOM is another name we featured in January 2021 in the same article with SNDL. It went on to triple from there but has since returned to where the rally started.
The stock has found support around the $0.74 level. Technical analysts will point out that a bullish double bottom on the daily chart could be in the works.
ZOM has been one of the biggest penny stock success stories in recent years. After flirting with delisting territory in November 2020 at $0.06, it soared to nearly $3.00 in February 2021.
It has been well-publicized as one of the biggest meme stocks that enamored social media influenced traders earlier this year. That enthusiasm has since died down but ZOM may be getting a second wind.
The company provides diagnostics to veterinary clinics and animal hospitals. Putting its meme days aside, ZOM has plenty of merits as a play on pet ownership, a trend that has taken off during the pandemic.
Granted, ZOM didn’t generate any revenue last year and recorded a net loss of more than $16 million. Still, it has gone all-in on its Truforma animal diagnostic platform.
That decision has started to look good. On March 16th, it announced its first Turforma sale to Guardian Veterinary Specialists, an animal hospital and critical care unit in Brewster, New York. But after a brief rally, the market shrugged off this development. We may later look back on this as a mistake.
There may be reason to believe more sales are ahead. Last month, ZOM announced plans to build a direct sales force to get the word out about Truforma. This in conjunction with its distribution partnerships has the potential to take sales leads to a new level.
ZOM is targeting a U.S. animal diagnostics market that it projects will reach $5.4 billion by 2026. Getting its foot in the door at more veterinary centers would be the break ZOM is sorely after—and could send the stock on a long run.
If over time ZOM strays from being a one-trick pony, it could have opportunities to participate in the broader veterinary services market that IBIS World estimates will top $50 billion this year.
The ZOM vibes are getting more bullish on Reddit and other popular social platforms. Some are speculating that the stock is getting ready for an encore performance whether by way of positive news or investor emotions. Either way, ZOM is one to check up on.
As we keep saying, there are always opportunities in the markets and it’s our job to find winning penny stocks for our subscribers. Huge gains can be made in such a short amount of time.
If you like any of these 4 penny stocks, our best advice is to be patient and throw bids in below the market. Buying dips and selling rips as swing trades remains the best strategy.
It’s also important to look for penny stocks that have yet to run. There are plenty of opportunities out there and we screen hundreds of penny stocks each week looking for the best alerts for our subscribers.
Remember, all it takes is one or two to become a winner and you’ve crushed the market indices for the year.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.