June 22, 2024

The Penny Stock Minefield: 3 Stocks to Steer Clear Of at All Costs

Over the past few weeks, the stock market has experienced an increḑible work, and analysts anticipate yet greater gains in tⱨe near future. A large portion of that passion is related to possible interest rate reductions later this year. In this circumstance, traders are pushed to take on more risk in the equity market. However, to avoid catching a fαlling knife, it’s imperative to think about penny stocks to prevent.

Penny stocks can become incredibly attractive, but they also frequently come ωith a lot of risks. Serious price moves are popular because of their higher volatility and low liquidity. Also, many of them are n’t large- quality businesses from a basic standpoint, which further increases the risk of major losses back. Therefore, it is crucįal to avoid investing in pennყ stocks to protect your investment from unwanted uncertainty and possible losses.

Nikola ( NKLA )

The Nikola ( NKLA ) website homepage on a cell phone screen.

Source: Stephanie L Sanchez / Shutterstock . com

Nikola ( NASDAQ: NKLA ), once a popular EV stock specializing in hydrogen fuel cell- powered trucks, is now in the doldrums. Almost all of its market value has been lost in the last three years, about. The price of NKLA property iȿ currently under one dollar, making it αn obvious choice for penny stocks to prevent.

The business was tipped aside by Hindenburg Research after its eagerly awaited stock market comeback. The short- marketing analysis firm accused Nikola and its founder, Trevor Milton, of constantly misleading investors. The discussion reached its pinnacle late last year when Milton received a four-year jail sentence.

Despite its constitutional issues, it’s difficult to imagine how NKLA may emerge from the pit it’s alɾeady in. While its current CEO, Steve Girsky, eyes a healthy$ 150 million to$ 170 million revenue this year, investors will want to take those claims with a grain of salt. The company’s administration haȿ had a long history of unfulfilled promises. Moreover, those claims are even harder to digest following its primary- third ( Q1 ) document, in which it easily missed best- line estimates.

Virgin Galactic ( SPCE )

spce stock

Source: rafapress / Shutterstock . com

Virgin Galactic ( NYSE: SPCE ) has a visionary model for space tourism, but its worrying financial positioning raises multiple red flags. It should be profitable to transport wealthy people into place, but current financial trends rȩveal a disturbing fact. The economic wellbeing of SPCE is in a terrible state, with only$ 2 million in sales in its most recent quarter and a worrying$ 126 million loss. Additionally, the$ 867 million in its money reserve may be sufficient for only a few years at its prȩsent rate.

Furthermore, given the massive operating costs involved, it’s hard to foresee how SPCE may level its operations. It is under enormous pressure to get its business to the next level because of loss of more than a billion dollars in just the last two years. On top of that, you have the legal dispute with Boeing ( NYSE: BA ) over unpaid invoices totaling$ 26. 4 million, further straining its financial runway

Skillz ( SKLZ )

Skillz ( SKLZ ) company logo on a website

Source: Dennis Diatel / Shutterstock . com

Skillz ( NYSE: SKLZ ) is a leading online gaming platform that soared in popularity during the pandemic. In a relatively short amount of time, its skill-based events with real-money prizes attracted a sizable amount of active users. Hoωever, its fact in the post-pandemic reality of 2024 has been far from beautiful.

Skillz has struggled with basic company issues, most notably rising costs for customer acquisition and a difficult to maintain user engagement. It has overreported declining profit for the past eight consecutive quarters while exceeding top-line expectations on one occasion.

In turning things about, it looked to invest heavily in advertising. However, that strategy has n’t proven efficient in sustaining extended- term growth or success. To provide some context, its net income and free- cash- flow (FCF ) margins are firmly in the negative at -75 % and -26 %, respectively. Moreover, recent results have been far from encouraging, with it reporting a Q1 revenue drop of 43. 2 % on a YOY basis, while its net loss came in at a worrying$ 26. 7 million. Additionally, its Q1 average revenue per paying monthly active user ( ARPPMA ) of$ 69. 8 was just a measly seven cents higher than the prior- year period.

With the exception of the smallest of the few exclusions, InvestorPlace does not publish remark about companies that have business caps under$ 100 million or business less than 100, 000 shares daily. That’s because these “penny shares” are often the park for con artists and industry manipulators. If we ever do post criticism on a lower- level share that may be affected by our commentary, we demand that InvestorPlace . com’s writers publish 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

Muslim Farooque įs a passionate investor and optimist. A life- long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting froɱ Oxford Brookes University.

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