Investing in penny stocks has always held a certain charm. The idea of owning vast quantities of shares in a company with moonshot potential for a minimal sum appears as an easy way to prosperity. However, lurking behind this allure lies a world filled with incredible volatility. While some undisputed gems are trading under $5, many are on the list of penny stocks to sell, steering through remarkably uncertain territories.
Moreover, the penny stock domain has shown even greater unpredictability recently, especially in unstable markets. Some of these stocks experience wild swings, with their brief highs often powered by short-lived retail enthusiasm. In an uncertain financial landscape, it’s imperative to take a discerning look at portfolios and steer clear of these three high-risk penny stocks.
BRC (BRCC)
BRC (NYSE:BRCC), a driving force behind Black Rifle Coffee, boldly entered the stock market, aiming to challenge the industry titans in its niche. For a company once viewed as the emerging “Red State Starbucks,” recent developments have somewhat dimmed the early enthusiasm surrounding the stock. While audacious, the firm’s venture presents a bold and challenging narrative in the crowded coffee domain.
Despite boasting a robust 39% revenue surge in the second quarter, the journey toward actual profitability presents a starkly contrasting picture. Delving deeper into the financials, specifically with a 31% drop in the levered free cash flow margins, the underlying narrative becomes significantly more intricate and warrants a prudent approach. Moreover, confronting a 56% dip year-over-year, BRC grapples with financial turbulence. With initial radiance now shadowed by these fiscal clouds, sustaining its market and economic position becomes an intricate task in a highly competitive industry.
Rigetti Computing (RGTI)
Rigetti Computing (NASDAQ:RGTI) embarked on a bold quest to pioneer quantum computing applications, launching itself into the public eye through the special purpose acquisition company (SPAC) arena. Initially priced at $10, RGTI’s shares went downward, landing below a dollar, illustrating a rollercoaster financial journey from the outset.
Nonetheless, Rigetti witnessed a remarkable 56% revenue bump year-over-year. However, not all aspects of its endeavors radiate optimism as quantum researchers have highlighted notable error rates, especially concerning its superconducting transmon qubits, reflecting a shadow of skepticism on the company.
Moreover, the investment focus seems to shift toward alternative quantum routes, notably trapped ion systems, favored by competitors like IonQ (NYSE:IONQ). Additionally, while grappling with subdued revenues and what some perceive as a second-tier quantum system, Rigetti remains a spirited participant in the quantum computing arena. Yet, the encircling challenges and a discouraging one-year price performance figure of -31.38% cast a shadow of uncertainty over its path ahead.
Nikola (NKLA)
Nikola (NASDAQ:NKLA), an electric vehicle manufacturer, faces uncertain financial challenges after witnessing a peak above $3 per share due to a hefty purchase order. Concerns grew over a significant 71.4% decrease in cash balances, dropping from a whopping $840.9 million in December 2020 to just $243 million recently, quietly hinting at potential financial difficulties beneath the surface.
Moreover, NKLA’s vehicle recall in August, triggered by problematic batteries and accompanied by fire incidents linked to their products in Arizona, casts a persistent shadow over its operational robustness and brand integrity. These incidents tarnish the firm’s reputation, leading cautious investors toward skepticism.
Furthermore, with the stock price plummeting 35.14% this year, the company’s financial trajectory adds an extra layer of uncertainty to the equation. Therefore, burdened by issues like a dilutive convertible note offering, NKLA emerges as a penny stock that prudent investors might consider divesting, treading cautiously through the speculative electric vehicle domain.
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
On the date of publication, Muslim Farooque 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