3 Fundamentally Strong Penny Stocks to Buy for 3-Bagger Returns by 2025

Stocks to buy

The S&P 500 index is trading near all-time highs. Dozens of blue-chip and quality growth stocks have surged higher and trade at rich valuations. With the possibility of rate cuts, it’s likely that the markets will remain in an uptrend and I expect euphoria to strike meme and penny stocks.

However, it’s time to be cautiously optimistic given the market valuations. I would stay away from stocks that are purely speculative and represent companies with poor business fundamentals. Instead, the focus should be on fundamentally strong meme and penny stocks to buy with impending growth catalysts.

If the market is correct, these penny stocks are likely to decline. However, they are unlikely to witness a meltdown that’s common with purely speculative rallies. Let’s therefore discuss the fundamental factors that are likely to be catalysts for a multi-fold rally in these hot penny stocks.

Iamgold (IAG)

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Iamgold (NYSE:IAG) stock has witnessed a sharp rally of 50% in the last 12 months. However, the gold mining stock looks attractively valued at a forward price-to-earnings (P/E) ratio of 13.5. On the back of multiple catalysts, I expect IAG stock to surge higher in the coming quarters.

The first point to note is that gold is trading at $2,370 an ounce. Iamgold is positioned to benefit from higher realized prices that will translate into robust cash flows. With the possibility of multiple rate cuts in the next 18 months, I believe that the precious metal will trade above $2,500 an ounce. This is the first catalyst for the gold miner.

Further, Iamgold is positioned to accelerate production in the coming quarters. In Q1 2024, the first gold was reported from its Cote asset. The company is targeting Cote to exit 2024 at 90% throughput with a 2024 production guidance from the asset at 220,000 to 290,000 ounces.

Therefore, the factors of gold price upside, production growth, and a strong balance sheet are likely to be triggers for IAG stock upside. In my view, dividend initiation might also be in the cards and will imply a stock re-rating.

Bitfarms (BITF)

Source: PHOTOCREO Michal Bednarek / Shutterstock.com

Bitcoin (BTC-USD) has witnessed a deep correction in the last few trading sessions. This seems like a good opportunity to accumulate the cryptocurrency and quality crypto stocks. Bitfarms (NASDAQ:BITF) is a fundamentally strong Bitcoin miner that looks deeply undervalued considering its growth plans. If Bitcoin trades at new highs in the coming quarters, BITF stock is poised for multi-bagger returns.

From a balance sheet perspective, the Bitcoin miner has zero-debt. Further, a liquidity buffer of $124 million in cash provides ample flexibility to pursue aggressive expansion. Bitfarms ended Q1 2024 with hash rate capacity of 10.4 exahash per second (EH/s). The miner is targeting to boost capacity to 21 EH/s by the end of the year and further to 35 EH/s by the end of 2025.

The expansion is likely to translate into robust growth in revenue, EBITDA and cash flows. It’s worth noting that for Q1 2024, Bitfarms reported an adjusted EBITDA margin of 42%. EBITDA margin will likely be more than 50% in the coming quarters on the back of operating leverage and upside in the crypto.

Archer Aviation (ACHR)

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I am of the view that flying car stocks are likely to be among the hottest names to consider in 2025. The reason is that most flying car companies are on-track for commercialization of eVTOL aircraft neat year. Archer Aviation (NYSE:ACHR) is among the attractive names to consider for multibagger returns in quick time.

It’s worth noting that ACHR stock was in a downtrend in the last few quarters. However, over the last month, the stock surged by 36%. The stock seems to have bottomed out and with positive news flow, I expect a big rally.

Recently, the flying car company received an additional investment of $55 million from Stellantis (NYSE:STLA). This funding was on completion of the flight test milestone. Back in 2023, Stellantis had invested $110 million in Archer. It’s worth mentioning that United Airlines (NYSE:UAL) is also an investor and strategic partner in the eVTOL company.

In terms of growth visibility, Archer is on track for eVTOL commercialization in the U.S. in 2025. Additionally, the company has local partnerships for expansion in the UAE, India and Korea. The construction of a manufacturing facility is underway with a potential capacity to build 650 eVTOL aircraft annually. This will position Archer for significant scale-up in operations.

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

On the date of publication, Faisal Humayun 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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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