10 Best Penny Stocks to Buy in February 2022

2022 is turning out to be a tough year for investors. Speculative companies, growth stocks, and penny stocks have especially been under pressure amid the broader market sell-off.

The SEC defines penny stocks as securities that trade below $5 and are issued by small companies. Thanks to the sell-off in markets, several stocks, especially those that went public through a SPAC reverse merger, have also turned penny names. Here are the 10 best penny stocks that you can consider in February 2022.

1. Taseko Mines (NYSE: TGB)

While there has been a bloodbath in penny stocks in 2022 and most are trading close to their 52-week lows, Taseko Mines has largely held its ground and is down only about 7% for the year. The losses look quite small looking at the crash in other penny stocks.

What makes TGB a good penny stock to buy?

TGB is a copper miner having operations in Canada and the US. Notably, most of the copper mining is situated in Latin America with Chile being the largest producer. The region has been known for political volatility and some of the new mines have faced opposition from local communities.

TGB’s operations in low-risk countries make it an attractive penny stock to buy. Copper is also among the metals where most analysts have a bullish long-term forecast. The copper intensity in electric cars and renewable energy is higher than ICE (internal combustion engine) cars and non-renewable energy generation respectively.

Copper demand is expected to be strong over the next decade led by the green energy transition. However, supply might not keep pace given years of underinvestment in new mines. Copper inventories are running quite low which is also supportive of the prices.

While most copper producers are large-cap companies, Taseko Mines is a penny stock in the copper industry. Reasonable valuations and copper’s favorable long-term outlook make TGB a penny stock worth considering.

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2. Joby Aviation (NYSE: JOBY)

Joby Aviation went public in 2021 by merging with Reinvent Technology Partners. It is an urban air mobility (UAM) company that is among the most interesting investing themes for the next two decades. The company also acquired Elevate, which was Uber’s flying taxi business. Uber also sold off its autonomous car business to Aurora to focus on the ride-hailing and food delivery business. Joby Aviation stock has been under pressure amid the sell-off in speculative growth names which have their earnings skewed towards the future.

The potential for UAM makes Joby Aviation a stock worth considering

The UAM market is evolving and analysts have differing projections for the sector. Morgan Stanley expects UAM’s market to rise to $1.5 trillion by 2040. The stock tumbled last week amid the broader market sell-off. The fact that one of its prototypes crashed during testing did not help matters.

That said, if you want to bet on UAM, Joby Aviation is among the best names in the space. The company’s valuations have also become reasonable after the crash and its market cap is just under $2.9 billion.

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3. Didi Global (NYSE: DIDI)

Didi went public in 2021 by listing on the US stock markets. The listing was muted and it could not command the kind of valuations that some expected it to do. However, soon troubles started to emerge for Didi back home and Chinese authorities eventually asked it to delist from the US markets.

Didi’s stock has fallen below $5 and it is now in the penny stock category. However, at these prices, Didi looks like a penny stock worth betting on. The listing in Hong Kong would provide liquidity to investors and also allay the concerns of the Chinese government over data privacy.

Didi’s lead in China makes it an attractive penny stock

Didi stock has been a victim of US-China geopolitical tensions but a Hong Kong listing would help long-term price discovery as the company’s fundamentals would get more weightage than the controversies. Its valuation is now way below its private market valuation prior to the IPO and the market cap is even below $20 billion.

The company has a strong leadership position in China and if you can be patient with the stock, it can deliver good returns over the long term. At these prices, it is one penny stock worth considering.

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4. Desktop Metals (NYSE: DM)

3D printing company Desktop Metal also went public through a SPAC reverse merger. However, it now trades well below the SPAC IPO price and is a penny stock.  Wall Street analysts are quite bullish on the stock despite the recent sell-off. Its median target price of $9 is an upside of almost 132% from these levels. The stock even trades below the street low target price while the street high target price of $16 is a 310% upside over current price levels.

DM has become a penny stock

DM has a market cap of around $1.2 billion and trades at a fraction of its 52-week highs. The company is into 3D printing. ARK Invest has a 3D printing ETF and DM stock is the third-largest holding of the fund. 3D printing has a positive outlook and DM is among the best penny stocks in the space.

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5. FuelCell Energy (NYSE: FCEL)

There has been a massive sell-off in fuel cell stocks and FCEL fell into the penny stock category. While the stock is off its 52-week lows, it still trades around $5. FCEL stock is a long-term play on the fuel cell industry. The Biden administration is pivoting towards green energy, unlike the Trump administration which was more favorable towards fossil fuel energy. Re-joining the Paris Climate Deal was among Biden’s first decisions after assuming office earlier this year.

FCEL is a penny fuel cell stock

Wall Street analysts are not too bullish on FCEL stock and all nine analysts covering it have a hold rating. The stock’s median target price of $5 is similar to current prices. Over the last year, several brokerages have downgraded the stock.

Meanwhile, just like the euphoria towards green energy stocks was overdone, even the current crash seems to have gone too far. At these prices, FCEL looks like a good penny stock in the fuel cell industry.

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6. Grab (NYSE: GRAB)

Grab recently went public and has had a dismal ride since then. The stock fell into the penny stock category but currently trades just above $5. Grab is a play on the long-term growth story in the ASEAN region. The company has a strong moat in the region and is transforming into a superapp. The long-term forecast for the company looks positive. Notably, with Chinese stocks looking risky amid the continued crackdown in the communist country, some investors might find Southeast Asia as a good bet.

Southeast Asia has a total population of 670 million and Grab sees its total addressable market rising to $180 billion by 2025. The company expects to post revenues of $4.5 billion and an adjusted EBITDA of $0.5 billion by 2025.

Goldman Sachs is bullish on Grab stock

Goldman Sachs is bullish on Grab stock and believes that the company has a clear path towards profitability. Wall Street analysts are quite bullish on Grab and the stock has 12 buys and one sell rating. Its median target price of $9 is a 63% premium over current prices.

Grab now has a market cap of just about $20 billion which looks attractive considering the massive market opportunity for the company.

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7. Senseonics (NYSE: SENS)

Senseonics has lost over a third of its market cap in 2022 and is trading near its 52-week lows. The company produces the Eversense CGM (continuous glucose monitoring) system which is an implantable device that could revolutionize the diabetic care market. The CGM market is expected to rise at an annual pace of 12.7% between 2020 and 2027 according to Grand View Research. It forecasts the market to reach $10.4 billion by 2027.

Earlier this month, SENS announced that the US FDA has approved the next-gen E3 CGM system with an implantable life of six months. Surprisingly, the stock crashed despite the positive news.

Commenting on the development, Senseonics’ CEO Tim Goodnow, Ph.D. said “Further extending the duration of the longest lasting CGM system to 6 months represents a massive leap forward for patients and towards our mission of transforming lives in the global diabetes community.”

SENS is a penny healthcare stock worth considering

SENS is producing an exciting product that can create strong demand for itself. It has also restructured its business and outsourced the commercialization function to Ascensia. The good point about SENS is that it already has a product and just needs to efficiently commercialize it. This is unlike clinical-stage companies that don’t have an approved product.

While there could be short-term volatility, SENS looks like a penny stock worth considering at these prices.

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8. Sundial Growers (NYSE: SNDL)

Sundial Growers is a Canadian cannabis company. Cannabis stocks have fallen sharply from their 2021 peaks as the legalization bill has taken a backseat in the US. SNDL reported cannabis revenues of CAD (Canadian dollars) 14.4 million in the third quarter of 2021, which was 12% higher than the corresponding quarter in 2020. It posted an adjusted EBITDA of CAD 10.5 million. It has almost $800 million worth of cash and other investments on its balance sheet while its market cap is just around $1.2 billion.

SNDL is a penny cannabis stock with a strong balance sheet

SNDL is a penny cannabis stock with a strong balance sheet. It capitalized on the meme stock rally and issued shares to raise cash. As a result, it’s a cash-rich company now without any debt. At these prices, there is a reasonable margin of safety in SNDL stock as the cash on its balance sheet would provide valuation support.

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9. Arrival (NYSE: ARVL)

Arrival is a UK-based electric vehicle company working on electric busses and vans. It went public through a SPAC reverse merger at a valuation of $13 billion. However, after the initial hype, the stock now trades at a fraction of that valuation. Startup EV companies have been under pressure and the sell-off has only intensified this year. The company has a differentiated business model and is building micro-factories unlike some of the other companies that build massive plants.

Wall Street finds Arrival a penny stock worth betting on

Wall Street analysts are quite bullish on Arrival stock and its median target price of $17.02 is a premium of almost 355% over current prices. The company is expected to generate revenues of $5 billion by the fiscal year 2023, which is almost twice its current market cap. If the company can deliver on the vehicle deliveries, Arrival could be a multibagger penny stock.

The outlook for the EV industry looks positive and at current prices levels, Arrival looks like a penny stock worth watching.

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10. AdvisorShares Dorsey Wright Micro-Cap ETF (NYSE: DWMC)

Since penny stocks are risky and more volatile, you can also consider an ETF that invests in such stocks. While passive ETFs are otherwise a good investing strategy, for penny stocks it might be prudent to look at an active fund. DWMC is one ETF that can give you exposure to penny stocks. However, the ETF has a higher net expense ratio of 1.27%.

DWMC is a good way to invest in penny stocks

ETFs can be a good investing strategy, especially for investors who lack the time or analytical skills to pick individual stocks. Especially when it comes to penny stocks, a buy-and-hold approach might not work, as say for quality large-cap stock. It might therefore be prudent to have an expert fund manager take the investment call.

All said, given the current macro environment, investors should do their due diligence before buying penny stocks. Also, it would be prudent to diversify the investment across multiple names and do a staggered buying.

Penny stocks have been out of favor and might continue to do so for some more time. However, the quality penny names should eventually recover.

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