I believe that equity markets are at a point where small-cap and penny stocks can go ballistic. The assumption of multiple rate cuts in the next 12 to 18 months backs this general view. Easy money policy translates into higher speculative activity and high-beta stocks surge. This column discusses three high-risk stocks under $20, likely to triple before the end of 2025.
While a potential rate cut is a catalyst, it’s not the only reason to be bullish on these high-risk stocks. These stocks represent companies positioned for stellar growth in the coming years. These emerging companies have good fundamentals that back the bullish thesis.
Further, the stocks discussed have been subdued in the last few quarters. This provides a good entry point. Let’s discuss the company-specific catalysts to ensure these high-risk stocks surge under $20.
QuantumScape (QS)
In December 2020, QuantumScape (NYSE:QS) stock touched all-time highs of $132. The fall was sustained from that phase of euphoria, and QS stock trades at $6.2. The stock has bottomed out and is poised for a strong rally in the next 12 to 18 months.
A key reason for being bullish is the Company’s progress towards commercialization of solid-state batteries. QuantumScape targets low volume QSE-5 prototype (first commercial product) production this year. Higher volumes are targeted for 2025. Therefore, I expect significant price action as QuantumScape moves closer to commercialization.
An important point to note is that the Company reported a liquidity buffer of $1 billion as of 2023. This provides ample flexibility as the Company “transitions from prototype to product and prepare for subsequent industrialization.”
QuantumScape seems well-positioned to grow in the next few years with claims of six commercial agreements with automotive OEMs. Further, Volkswagen (OTCMKTS:VWAGY), being a strategic investor and joint venture partner, adds credibility to the growth story.
Borr Drilling (BORR)
Borr Drilling (NYSE:BORR) is another interesting name positioned to surge higher. The offshore drilling services provider was subdued last year. This does not come as a surprise, as oil remains weak on the back of macroeconomic challenges.
However, I am bullish on increasing oil, with rate cuts likely soon. This is likely to be a major catalyst for BORR stock. It’s worth noting that the stock trades at an attractive forward price-earnings ratio of 9.7. The stock also offers a dividend yield of 1.5%, and I expect healthy dividend growth in the coming years.
It’s important to mention that Borr Drilling ended 2023 with an order backlog of $1.75 billion. This provides clear cash flow visibility. Last year, Borr reported adjusted EBITDA of $351 million. The company has guided for an adjusted EBITDA of $525 million for the year.
Order intake will likely remain robust if oil trends higher. This will set the stage for further growth in EBITDA and cash flows in 2025. Therefore, BORR stock is positioned to surge with a robust EBITDA growth outlook and valuation gap.
Joby Aviation (JOBY)
I believe that it’s one of the best times to consider exposure to flying car stocks. Some of the best names in the industry are positioned to commercialize eVTOL aircraft in 2025. Healthy growth will likely follow in the next few years.
Joby Aviation (NYSE:JOBY) is among the best names for multibagger returns. After making highs in July 2023, JOBY stock has been in a correction mode. However, the selling seems overdone, and with positive business developments, a big reversal rally is likely.
Regarding progress toward commercialization, Joby has completed the third stage of Federal Aviation Authority certification. With two stages remaining, the Company is on track to launch operations in the near future. It’s worth noting that Joby has a cash buffer of $1 billion as of Q4 2023. There is ample flexibility to invest aggressively as the Company focuses on building its manufacturing infrastructure.
Besides the United States, Joby has signed an agreement with the government of Dubai that grants exclusive rights to operate air taxis in the Emirate for six years. I also expect aggressive expansion in global markets in the next 24 months.
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.