Speculative stocks are those that investors buy knowing that they could lose most of, if not all, their investment. However, they also believe (or speculate) that these companies may produce life-changing returns to the upside.
Many companies associated with these stocks have a business model with a perceived likelihood, but not a guarantee, of success. Many also trade as penny stocks. Some have poor fundamentals, including, in many cases, being unprofitable. And, as you would expect, many of these companies are small-cap companies that may fly under the radar of analysts.
Nevertheless, speculative investors are drawn to these stocks because they perceive something in them that they believe the market may be missing. Plus, the fact that many come with a low stock price makes them more volatile, allowing a trader to exit a position quickly.
Unsurprisingly, many speculative stocks are found in areas such as mining, biotechnology, and technology. And since 2009, you can add Bitcoin stocks and cryptocurrency to this list. To illustrate this point, 18 biotech companies declared bankruptcy in 2023. That was a 10-year high, which topped the previous ten-year high of eight, which was set in 2022.
In this presentation, we're highlighting seven speculative stocks. We'll highlight each of their potential use cases and explain the risk to investors.
Quick Links
- Vertical Aerospace
- Weave Communications
- Dynagas LNG Partners
- Soligenix
- Riskified
- PubMatic
- iCAD
#1 - Vertical Aerospace (NYSE:EVTL)
Vertical Aerospace Ltd. (NYSE: EVTL) is one of the speculative stocks for investors to consider in the emerging flying car sector. Flying cars, also known as electric vertical take-off and landing aircraft – or EVTOLs, are becoming a reality. We're not close to flying around like The Jetson's. Still, this sector has practical applications, particularly as alternatives to ground transportation for commutes such as to and from an airport in a congested urban area. There are also obvious applications in disaster relief and delivering food and medical supplies to urban areas.
Vertical Aerospace has a prototype, the VX4, that has already logged over 1,000 test flights. The VX4 can hold up to four passengers plus a pilot and can travel up to 100 miles. If the company continues on its current path, it may begin commercial operations in 2025.
However, the company is recovering from a setback after a crash in the UK in 2023. It's also facing a cash burn that, as of December 2023, left the company funded through September 2024. However, the company's founder and chief executive officer, Stephen Fitzpatrick, recently pledged to invest $50 million into the company to extend its cash runway into 2025.
The company has also received a delisting notice from the New York Stock Exchange (NYSE) because the EVTL stock price has been below $1 for 30 consecutive trading days.
About Vertical Aerospace
Vertical Aerospace Ltd., an aerospace and technology company, engages in designing, manufacturing, and selling zero operating emission electric vertical takeoff and landing (eVTOL) aircraft for use in the advanced air mobility in the United Kingdom. It offers VX4, an eVTOL aircraft. Vertical Aerospace Ltd.
Read More - Current Price
- $7.89
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 1 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $10.33 (31.0% Upside)
#2 - Weave Communications (NYSE:WEAV)
Weave Communications Inc. (NYSE: WEAV) offers a customer communications and engagement software platform for server message block (SMB) healthcare practitioners in the United States. These SMBs are often forced to deploy a series of platforms to handle messaging, payments, and the like. Weave's platform integrates it into an all-in-one system that makes offices more efficient and increases patient satisfaction.
With annual revenue of just over $1 billion, the company believes it's only scratching the surface of its total addressable market (TAM). Weave is not yet profitable, but it has had seven consecutive quarters of expanding margins, and the company is now reporting positive cash from operations and free cash flow (FCF).
WEAV stock is up 122% in the last 52 weeks. That has the stock near the top of the consensus price target of the Weave Communications analyst ratings on MarketBeat. However, as the company adds customers and becomes profitable, this stock will have significant room to run higher.
About Weave Communications
Weave Communications, Inc provides a customer experience and payments software platform in the United States and Canada. Its platform enables small and medium-sized healthcare businesses to maximize the value of their patient interactions and minimize the time and effort spent on manual or mundane tasks.
Read More - Current Price
- $16.12
- Consensus Rating
- Buy
- Ratings Breakdown
- 4 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $16.50 (2.4% Upside)
#3 - Dynagas LNG Partners (NYSE:DLNG)
Since Russia invaded Ukraine in 2022, investors have come to understand the strategic importance of liquefied natural gas (LNG), particularly in Europe. Dynagas LNG Partners LP (NYSE: DLNG) is one of the leading names in LNG transportation. The company has a fleet of six carriers that can transport 914,000 cubic meters of LNG all over the globe.
The issue for the moment may be the company's balance sheet, which shows it is still working through a considerable amount of debt. However, the company's business model is based on multi-year contracts. As of December 2023, 99.8% of the Dynagas fleet was being deployed, and the company has a backlog of contracts through 2027 amounting to $1.16 billion. That should go a considerable way towards stabilizing the balance sheet.
Dynagas does not receive extensive analyst coverage. But it recently received a Strong Buy rating from Stocknews.com, which initiated its coverage of the stock on February 8, 2024.
About Dynagas LNG Partners
Dynagas LNG Partners LP, through its subsidiaries, operates in the seaborne transportation industry in Greece and internationally. The company owns and operates liquefied natural gas (LNG) carriers. Its fleet consists of six LNG carriers with an aggregate carrying capacity of approximately 914,000 cubic meters.
Read More - Current Price
- $4.57
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Soligenix (NASDAQ:SNGX)
Soligenix Inc. (NASDAQ: SNGX) is a late-stage biopharmaceutical company focusing on developing and commercializing products to treat rare diseases. Like many clinical-stage biopharma companies, Soligenix is a penny stock and is likely to remain that way until, and unless, it can get one of its pipeline candidates across the finish line.
That's where the bullish case exists. The company's lead candidate is HyBryte, a photodynamic topical therapy for treating early-stage cutaneous T-cell lymphoma (CTCL). The company recently completed a Phase 3 trial. It was granted Orphan Drug and Fast Track Designation in the United States, Orphan Drug Designation in Europe and Promising Innovative Medicine designation by the UK Health Authority.
SNGX stock is not heavily covered by analysts. However, the one firm that has issued a rating gives the stock a Strong Buy rating with a $3.00 price target. That would be a gain of over 347%, making Soligenix the very definition of a speculative stock.
About Soligenix
Soligenix, Inc, a late-stage biopharmaceutical company, focuses on developing and commercializing products to treat rare diseases in the United States. The company operates through two segments, Specialized BioTherapeutics and Public Health Solutions. The Specialized BioTherapeutics segment develops SGX301 (HyBryte), a novel photodynamic therapy, which has completed Phase III clinical trial for the treatment of cutaneous T-cell lymphoma; SGX942, an innate defense regulator technology that is in Phase III clinical trial for the treatment of inflammatory diseases, including oral mucositis in head and neck cancer; SGX302, an IDR technology which is in Phase IIa study to treat mil-to-moderate Psoriasis; and SGX945 and IDR technology that is in Phase IIa protocol for the treatment of Aphthous Ulcers in Behçet's Disease.
Read More - Current Price
- $2.95
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Riskified (NYSE:RSKD)
Riskified Ltd. (NYSE: RSKD) offers an AI-powered fraud management and risk intelligence platform for e-commerce companies. E-commerce was gaining acceptance before 2020. Since then, an inflection point has been reached, and many consumers simply prefer e-commerce for many, if not all, of their purchases.
That increases the opportunity for e-commerce fraud, creating friction for the retailer and the customer. That's where Riskified comes in. The November 2023 investor presentation cited a Forrester study that showed the company increased retailer's return on investment (ROI) by 594% over three years.
In the first nine months of the company's fiscal year 2023, revenue is up 17%. The company has also posted five consecutive quarters of improving EBITDA. However, the company is still unprofitable. It's forecasted that the situation will change in 2024, and if it does, RSKD stock may beat current analyst estimates for a 22% upside.
About Riskified
Riskified Ltd., together with its subsidiaries, develops and offers an e-commerce risk management platform that allows online merchants to create trusted relationships with consumers in the United States, Europe, the Middle East, Africa, the Asia-Pacific, and the Americas. It offers Chargeback Guarantee that ensures the legitimacy of merchants' online orders; Policy Protect, a machine learning solution designed to detect and prevent refund and returns policy abuse in real-time; Account Secure, a solution that cross-checks every login attempt; Dispute Resolve, which is used to compile submissions for fraud and non-fraud related chargeback issues; and PSD2 Optimize that helps merchants avoid bank authorization failures and abandoned shopping carts.
Read More - Current Price
- $4.64
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $5.84 (25.9% Upside)
#6 - PubMatic (NASDAQ:PUBM)
PubMatic Inc. (NASDAQ: PUBM) operates in the emerging area of programmatic advertising. The company operates a sell-side digital advertising platform that connects publishers and app developers with advertisers in real-time bidding auctions that allow ad space to be sold more effectively.
The company posted a surprise profit in its November 2023 earnings report. That lifted PUBM stock about 3%, but that has barely put the stock in the black in the last 12 months.
Investors may buy the idea that digital ad spending is likely to increase in 2024. But even if it doesn't, PubMatic provides a reason to own the stock. That is, the company does not rely on third-party cloud computing platforms to run its infrastructure. That means the company can pull back on capex spending when ad revenue is down.
That being said, PubMatic is forecasting 600% earnings growth in the next 12 months. That may not be fully priced into analysts' 17% stock price growth forecast.
About PubMatic
PubMatic, Inc, a technology company, engages in the provision of a cloud infrastructure platform that enables real-time programmatic advertising transactions for digital content creators, advertisers, agencies, agency trading desks, and demand side platforms worldwide. Its PubMatic SSP, a sell-side platform, used for the purchase and sale of digital advertising inventory for publishers and buyers.
Read More - Current Price
- $15.44
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $21.13 (36.8% Upside)
#7 - iCAD (NASDAQ:ICAD)
Breast cancer remains the most commonly diagnosed cancer among U.S. women, with one in eight receiving that diagnosis. And conventional screenings only have 63% accuracy. iCAD Inc. (NASDAQ: ICAD) uses artificial intelligence to create a world "where cancer can't hide."
This is a dynamic use case for AI. However, iCAD is a speculative stock because the company's revenues are going down year-over-year even as AI adoption is increasing. And this is a year after the company announced its partnership with Alphabet Inc. (NASDAQ: GOOGL).
ICAD stock is only covered by three analysts. However, the consensus price target gives the stock a $4.83 consensus price target. That's a 236% upside from the stock's price on February 13, 2024.
About iCAD
iCAD, Inc engages in the provision of cancer detection and therapy solutions in the United States. It operates through two segments, Detection and Therapy. The company provides ProFound AI for digital breast tomosynthesis and 2D mammography; PowerLook, a density assessment solution; and ProFound Risk, a breast cancer risk analysis.
Read More - Current Price
- $1.83
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
Speculative stocks are typically purchased by short-term traders who only plan to hold a position for days, weeks, or months. Because they require a higher-than-normal risk tolerance, these stocks are typically popular during bull markets when many investors are looking to take on risk. By contrast, during corrections or bear markets, investors turn away from these stocks as they flee to the relative safety of other assets.
One final note: this doesn't mean investors with an appropriate risk tolerance shouldn't get involved with speculative stocks. It bears repeating that stocks like Amazon.com Inc. (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL) were all considered speculative stocks at one time. In 2024, a stock such as Palantir Technologies Inc. (NYSE: PLTR) was considered speculative until the middle of 2023, when it began to generate a profit.
With all that said, speculative stocks are only meant to take up a small portion of an investor's overall portfolio, and you should be sure to perform higher than your usual due diligence so you know when to get out.
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