In this article, we discuss 10 Penny Stocks With Huge Upside Potential According To Analysts.
Penny stocks trade below $5 and attract investors looking for high returns with a small initial investment. These stocks are often associated with small-cap and mid-cap companies, which have traditionally outperformed large-cap stocks due to their growth potential and higher risk. However, in recent years, these smaller firms have struggled to keep pace, as large-cap stocks—particularly major tech companies—have led market gains. A key factor behind this trend is the changing makeup of major stock indices. The broader market, heavily influenced by a handful of mega-cap stocks, has skewed overall market performance. If the so-called Magnificent Seven stocks were excluded, the wider market’s advantage over the small-cap Russell index would be significantly reduced. Historically, small-cap stocks have tended to outperform large caps following periods of market volatility.
At the end of December 2024, Fundstrat’s Tom Lee told CNBC that with the Fed cutting rates and a pro-business administration taking over, companies would likely see 2025 as a prime time for expansion, including mergers and acquisitions. He believes this will create a strong market for small and mid-cap stocks, with financials, cyclicals, and industrials benefiting the most. Lee also pointed out that Trump’s tariff policies and potential labor market disruptions from mass deportations could impact the stock market. Another risk is if the Fed focuses too much on inflation and weakens the labor market. On a different yet interesting note, he predicted Bitcoin could hit $250,000 in 2025, with Ethereum reaching $5,000-$6,000. He was also optimistic about Solana and other altcoins.
Similarly, Jill Carey Hall, who is BofA’s Head of US Small/Mid Cap Strategy, recently commented that financials and healthcare tend to see more mergers and acquisitions under Republican administrations, which could mean a strong market in 2025 if macro conditions stay favorable. She expects banks to benefit from a more relaxed regulatory environment, improving their margins and efficiency. While there is optimism around deregulation for small-cap stocks, she cautioned that in the recent past, they did not perform as well despite deregulation because their success was tied to tariffs, trade policies, and the manufacturing recession.
Further insights came from Chris Retzler, portfolio manager for Needham’s Small Cap Growth Fund, who shared his outlook for small-caps on CNBC’s Squawk Box on January 17, 2025. He noted that small-cap companies are looking for policy certainty, and once the new administration’s direction becomes clearer, we could see growth accelerate. Globally, the EV sector is thriving, even as it faces some hurdles in the United States.
Meanwhile, innovation in semiconductors, new materials, and infrastructure, especially data centers, is driving investment, creating opportunities for small caps as well. Retzler emphasized that if the government prioritizes American manufacturing, more infrastructure will be needed, benefiting small-cap stocks. He also highlighted the potential upside of moderate, well-implemented tariff policies and deregulation, which could boost M&A activity. When small caps are acquired and integrated into larger platforms, it helps recycle assets and reduce costs. IPOs may soon pick up, and Retzler sees a strong and optimistic market for small caps in the long run. With this outlook in mind, let’s take a look at some penny stocks with huge upside potential as per Wall Street analysts.
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Our Methodology
We checked multiple reliable sources to find penny stocks with big catalysts and strong growth potential. To see what retail investors are buzzing about, we also looked through Reddit discussions. Then, we checked Wall Street analysts’ average upside predictions for these stocks. We have also included the number of hedge funds holding each stock as of Q4 2024. The list below ranks them in ascending order based on upside potential as of March 20.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Arbe Robotics Ltd. (NASDAQ:ARBE)
Average Upside Potential as of March 20: 136.22%
Number of Hedge Fund Holders: 7
Arbe Robotics Ltd. (NASDAQ:ARBE) was founded in 2015 and is headquartered in Tel Aviv-Yafo, Israel. It is a semiconductor company that develops 4D imaging radar solutions for top automotive suppliers and manufacturers worldwide, including in China, the United States, Germany, and Israel. The company disclosed on January 7 that it plans to sell nearly 9 million shares at $3.20 each, expecting to raise around $29 million before fees. The company is also giving underwriters a 30-day option to buy over 1.3 million additional shares. The sale was meant to close by January 8, 2025. It aims to use the money for general business expenses.
On January 6, Arbe Robotics Ltd. (NASDAQ:ARBE) announced that it is collaborating with NVIDIA to push AI-driven free space mapping to the next level. At CES 2025, the company will showcase its ultra-high-definition radar, built to improve vehicle safety and autonomy by detecting small obstacles, handling complex environments, and working seamlessly with other sensors. With a high-resolution MIMO array, Arbe’s radar delivers accurate long-range detection in any conditions. Its integration with NVIDIA DRIVE AGX enhances hands-free driving and real-time safety. By combining advanced mapping and perception tech, Arbe is shaping the future of autonomous driving.
The company’s Q4 2024 earnings dropped to $0.1 million from $0.35 million the previous year, while full-year revenue fell from $1.5 million in 2023 to $0.8 million in 2024. As of December 31, 2024, Arbe Robotics Ltd. (NASDAQ:ARBE) had $24.6 million in cash, later adding another $54.5 million in January 2025 to strengthen its balance sheet. Looking ahead, Arbe expects to bring in between $2 million and $5 million in 2025, with most of that revenue coming in the second half of the year. It is one of the stocks with the biggest upside to look out for.
According to Insider Monkey’s fourth quarter database, 7 hedge funds reported owning stakes in Arbe Robotics Ltd. (NASDAQ:ARBE), compared to 3 funds in the last quarter. Anand Parekh’s Alyeska Investment Group was the largest stakeholder of the company, with 4.10 million shares worth $7.6 million.
9. Compugen Ltd. (NASDAQ:CGEN)
Average Upside Potential as of March 20: 148.35%
Number of Hedge Fund Holders: 10
Compugen Ltd. (NASDAQ:CGEN) is a biotech company developing new cancer therapies, with operations in Israel, the United States, and Europe. The company’s Unigen platform uses AI and advanced data analysis to discover and develop new cancer immunotherapies. By integrating multi-omics, single-cell RNA sequencing, and spatial omics data, it helps identify promising drug targets and refine treatments based on real-world trial results.
Unigen has already produced several promising drug candidates and secured partnerships with leading pharmaceutical companies. A notable collaboration is with AstraZeneca, which licensed Compugen Ltd. (NASDAQ:CGEN)’s TIGIT-binding antibodies in 2018, including COM902. So far, the company has received $40.5 million and stands to earn up to $200 million in milestone payments, plus royalties on future sales.
Compugen is in a strong financial position, with enough cash to keep operations running until 2027. This gives the company the flexibility to push forward with its clinical and early-stage research, including the Phase 1 trial of GS-0321, an anti-IL18BP therapy licensed to Gilead. In 2024, it secured a $30 million milestone payment from Gilead for IND clearance and continues to use its AI-powered Unigen platform to speed up drug discovery.
At the end of 2024, Compugen Ltd. (NASDAQ:CGEN) had about $103.3 million in cash, boosted by a $60 million upfront payment and the aforementioned $30 million milestone payment from Gilead, along with $15 million from AstraZeneca for Phase 3 trials of rilvegostomig. In early 2025, the company raised another $8.87 million through stock sales. With no debt, Compugen expects its cash reserves to cover operations into 2027.