The Penny Stock Revolution: 3 Companies Disrupting Their Industries

Avoid the penny stock minefield by carefully picking stocks with certain key characteristics

• Investing in penny stocks is a disaster waiting to happen unless you choose only those with real potential to make it big.
• Broadwind (BWEN): The wind energy equipment manufacturer has sales, profits and macroeconomic tailwinds behind it.
• Figs (FIGS): Designing apparel for healthcare professionals that goes beyond the typical monochrome, blocky uniform sets this penny stock apart.
• Archer Aviation (ACHR): Creating an industry from the ground up is risky but the eVTOL leader is one step closer to making it a reality.

Most penny stocks are terrible investments. Typically trading for less than $1 per share, penny stocks are story stocks in search of a reason to exist. They often have no customers, no sales, and, worse, no profits.

Yet the allure of investing in penny stocks is understandable. You can control hundreds or thousands of shares for very little money. And if the stocks move higher by just a nickel or a dime, you can make a lot of money.

Unfortunately, that rarely happens. Too often, penny stocks are pump-and-dump scams. Early investors hype the stock, and if it moves higher, they sell out, leaving everyone else holding the bag. That’s why the Securities & Exchange Commission warns investors to use great care when buying them.

While penny stocks are ripe for manipulation, not everyone is looking to rip off investors. Some small companies actually have sales and make money doing so. If you want to buy penny stocks, I recommend you start there.

Below are three companies that tick those checkboxes with one exception. But it is a special case and is still well worth your consideration.

Broadwind (BWEN)

As its name suggests, Broadwind (NASDAQ:BWEN) is in the wind energy business. It makes turbines and gearboxes for wind companies and offers assembly, testing, machining, and similar services.

Broadwind stock doesn’t trade below $1 a share, but at just under $4, it classifies as a penny stock under the SEC guidelines. It also has real products that customers want to buy. Last year, it generated revenue of $203 million and net income of $7.65 million or 36 cents per share, which meets my requirements for investment-worthiness.

BWEN stock is also being carried aloft this year, some 43% after it took off following first-quarter earnings. Despite sales falling 23% to $37.6 million, it easily beat top-line estimates of $34.9 million. And, where Wall Street had been expecting it to lose 6 cents per share, Broadwind surprised with adjusted profits of 7 cents per share.

The wind energy stock has tailwinds behind it, too. The U.S. Energy Information Administration forecasts wind power generation will grow 11% from 430 billion kilowatt hours (kWh) in 2023 to 476 billion kWh in 2025. As demand for wind farms grows, Broadwind should get its share of the business, which could push its shares out of penny stock territory.

Figs (FIGS)

Healthcare apparel company Figs (NASDAQ:FIGS) was not always a penny stock, and some might argue that with shares trading for around $5.50 a share, it is not one today.

Indeed, after Figs went public in 2021 at a price of $22 a share, they more than doubled to over $45 each. But the stock has been on a long path lower and could dip below the threshold.

That doesn’t mean you still shouldn’t consider FIGS stock. First-quarter revenue was flat year-over-year at $119 million, but it beat analyst expectations of $117 million. It also generated an adjusted profit of a penny per share, which also was ahead of break-even, so it still made the cut.

Although healthcare apparel doesn’t seem disruptive, Figs pursuing a direct-to-consumer model with stylish flair upended what is otherwise a stodgy and uninspired industry. It gained popularity by designing more functional clothes for healthcare professionals that better met their needs. It gained status by having healthcare influencers promoting its clothes on TikTok.

CEO Trina Spear said its quarterly performance “reflects strong engagement with our new product innovation and powerful storytelling campaigns as we returned to our roots.” Momentum picked up throughout the first quarter and is continuing into the second.

This could be the turnaround Figs stock investors need to keep the company from becoming an actual penny stock.

Archer Aviation (ACHR)

Electric vertical takeoff and landing (eVTOL) aircraft manufacturer Archer Aviation (NYSE:ACHR) is the exception to my penny stock rule. Archer has no revenue to speak of, no profits, and is very much a story stock. So why include it? Because it is a real business that is helping to launch an entirely new industry.

Although that sounds like a lot of hyperbole you can find within the filings of other pump-and-dump penny stocks, Archer is well on its way towards becoming a full-fledged business.

The Federal Aviation Administration just awarded the eVTOL stock a new Part 135 Air Carrier & Operator Certificate. This is significant. This means that Archer can begin operating aircraft commercially to refine its systems and procedures for launching its air taxi service next year.

Archer is on target to begin operations next year after it receives FAA Type Certification. Its Midnight aircraft will be put into service for airlines such as United Airlines (NASDAQ:AAL).

Archer is now only the second eVTOL company to receive the air carrier and operator certificate. Joby Aviation (NYSE:JOBY) received the designation two weeks ago.

Because Archer Aviation has more than just a good story to run on, I consider it a viable company. But make no mistake: there is still substantial risk, just as with any penny stock. Archer, Joby, and other eVTOL companies are trying to create an industry from the ground up. There is no guarantee there will be demand for the service. There should be, but that still remains to be seen.

In the meantime, ACHR stock is a penny stock ready to disrupt the transportation sector.

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 that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More: Penny Stocks — How to Profit Without Getting Scammed

This post originally appeared at InvestorPlace.

On the date of publication, Rich Duprey 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.

Category: Penny Stocks