In this article, we will take a look at the best fundamentally strong penny stocks to buy according to analysts.
Penny stocks often have a reputation for being volatile and risky, but some of these stocks are actually supported by strong fundamentals and growth potential. For investors willing to take the risk, such stocks represent a combination of valuation appeal and improving quality.
The broader macro backdrop remains an important consideration in the current market. In his December 18 article “Economic conditions outlook, December 2025”, Sven Smit, Senior Partner and former Chair of McKinsey Global Institute, Amsterdam, wrote that economic sentiment will turn more “optimistic,” with a weaker focus on trade policy and stronger confidence in companies’ prospects.
The article quoted a recent McKinsey Global Survey on the economic environment, in which surveyed executives reported the “brightest near-term expectations seen this year.” Over the last two quarters, trade policy changes have been identified as the leading risk to global growth. However, sentiment is shifting: respondents report increased optimism about their companies’ outlook, driven by leaders’ focus on customer needs and technology investments, rather than by macroeconomic conditions.
Generally, private-sector respondents now hold a more bullish view of their companies’ performance than they did earlier this year. As written by Smit,
“Sixty-three percent of respondents say their companies’ profits will increase in the next six months—the largest share since December 2024. Also, for the first time in 2025, more than half of respondents (52 percent) expect customer demand for their companies’ products or services to increase in the next six months.”
With this favorable outlook in mind, we have compiled a list of the best fundamentally strong penny stocks to buy according to analysts.
Our methodology
For this article, we filtered for stocks trading under $5. From this pool, we shortlisted stocks with market capitalizations over $2 billion and upside potential of at least 20%. We then ranked the stocks in ascending order by upside potential. We also included data on hedge fund holdings in these companies based on Insider Monkey’s database, as of Q3 2025.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
9. Clarivate Plc (NYSE:CLVT)
Upside Potential as of December 19, 2025: 20.34%
Market Capitalisation: $2.27 billion
Number of Hedge Fund Holders: 25
According to TheFly, Morgan Stanley downgraded Clarivate Plc (NYSE:CLVT) to Underweight from Equal Weight and reduced the price target to $3 from $5 on December 17. The firm believes that the company’s share will continue to underperform as its turnaround “continues to struggle.” From tight budgets to intense competition, the company’s strategic review is unlikely to generate significant value, the analyst says in a research note.
The leading bank noted guidance for flat-to-low-single-digit growth for Clarivate Plc (NYSE:CLVT) and limited operating leverage potential, which would result in low-single-digit adjusted EBITDA growth.
Morgan Stanley emphasized the funding pressures across key sectors, including pharmaceutical, academic, and government, as likely negative drivers under the current Administration, which could impact the company’s overall recovery. The competitive pressures arise from the accelerating AI, which could enhance the competitor’s capabilities to ingest data and compete within the company’s markets, the investment bank concluded.
Earlier on December 4, Ashish Sabadra, an analyst at RBC Capital, reaffirmed a ‘Buy’ rating on Clarivate Plc (NYSE:CLVT), setting a price target of $5. This reflects a potential upside of nearly 43% from the current price.
Overall, Clarivate Plc (NYSE:CLVT) has mixed analyst sentiment, with 30% of analysts covering the stock assigning a Buy rating and slightly more than half of the analysts holding a cautious view, as of December 19. The range between the high and low consensus price targets is also wide, with the consensus 1-year median price target of $4.20 implying about 20.34% upside.
Clarivate Plc (NYSE:CLVT) is a United Kingdom-based information services provider operating through three segments: Academia & Government, Life Sciences & Healthcare, and Intellectual Property. Incorporated in 1864, the company serves universities, government agencies, and other professional services organizations.
8. Coty Inc. (NYSE:COTY)
Upside Potential as of December 19, 2025: 22.70%
Market Capitalisation: $2.84 billion
Number of Hedge Fund Holders: 30
On December 19, Reuters reported that Coty Inc. (NYSE:COTY) had sold its remaining 25.8% ownership in Wella, a multinational hair care and cosmetics brand, to KKR in a $750 million transaction, while retaining a share of proceeds from any sale or IPO in the future.
Coty Inc. (NYSE:COTY) stated that it is entitled to 45% of any proceeds from a sale or IPO of the business after KKR’s preferred return is achieved, and intends to utilise the upfront cash to pay off its debt. Due to intensifying competition from newer brands, the company went through challenges over the last few years, particularly in the mass beauty segment. With that said, the company initiated a strategic review and considered selling the business to fully concentrate on its fragrances segment earlier this year. This refocus stems from the continuously declining demand for colour cosmetics, Reuters noted.
Thus, the company stated that the divestiture brings an end to the 5-year-old program to streamline both its offerings and operations. Coty Inc. (NYSE:COTY) acquired Wella from Procter & Gamble in 2015, as part of a $12.5 billion agreement for P&G’s beauty business.
On December 17, Citi slashed the price target on Coty Inc. (NYSE:COTY) to $3.50 from $4.25 and maintained a ‘Neutral’ rating, according to TheFly. The firm revised several targets in the beverages, household, and personal care sectors to better reflect its 2026 outlook.
Coty Inc. (NYSE:COTY) is a New York-based provider of branded beauty products worldwide. Founded in 1904, the company operates through two segments: the Prestige and Consumer Beauty.
7. Denison Mines Corp. (NYSEAMERICAN:DNN)
Upside Potential as of December 19, 2025: 25.73%
Market Capitalisation: $3.18 billion
Number of Hedge Fund Holders: 35
On December 17, Denison Mines Corp. (NYSEAMERICAN:DNN) announced the completion of a previously disclosed transaction with Skyharbour Resources Ltd., and the formation of four joint ventures from claims that previously comprised Skyharbour’s Russell Lake Uranium Project, which is located directly adjacent to the company’s flagship Wheeler River Project in Saskatchewan’s Athabasca Basin region.
According to a statement by Denison Mines Corp. (NYSEAMERICAN:DNN),
“The new joint ventures are designed to drive collaboration between Denison and Skyharbour’s technical teams and to accelerate the evaluation of the prospective exploration ground adjacent to and proximal to Wheeler River.”
Additionally, both entities have signed option agreements (the “Earn-In Option Agreements”), allowing Denison Mines Corp. (NYSEAMERICAN:DNN) to increase its stake in both Wheeler North and Getty East joint ventures, with each ownership interest going as high as 70%.
Earlier on December 4, Denison Mines Corp. (NYSEAMERICAN:DNN) entered into an Impact Benefit Agreement and Exploration Agreement with Métis Nation-Saskatchewan and associated regional organizations. The collaboration mainly incorporates environmental monitoring prospects, business development opportunities, and community investment opportunities.
Overall, Denison Mines Corp. (NYSEAMERICAN:DNN) is a consensus buy from all eleven analysts covering the stock. While the price target ranges from $3 to $4.80, the consensus 1-year median price target of $3.45 translates to an upside potential of 25.73%.
Denison Mines Corp. (NYSEAMERICAN:DNN) is a Canadian company specializing in uranium-bearing properties. Founded in 1954, the company has a 95% interest in its flagship Wheeler River uranium project.
6. UWM Holdings Corporation (NYSE:UWMC)
Upside Potential as of December 19, 2025: 28.47%
Market Capitalisation: $7.83 billion
Number of Hedge Fund Holders: 45
On December 19, Jefferies assumed coverage on UWM Holdings Corporation (NYSE:UWMC) with a Hold rating and a price target of $5, suggesting a potential upside of about 3%. This is in line with the consensus estimate, as nearly 80% of analysts covering the stock have assigned it a ‘Hold’ rating.
The global investment bank highlighted the company’s structural positioning and high operating leverage as it enters the upcoming mortgage cycle, but noted that the current valuation presents a balanced risk-reward profile.
Jefferies acknowledged the company’s prospects in the long haul, citing AI-powered systems that could improve volume and gain-on-sale margins, cost efficiencies expected by 2027, and broker channel expansion. Despite these factors, the firm pointed out that the stock price has already priced in “a material portion of the medium-term recovery narrative” for the mortgage market.
Just a day earlier, Keefe Bruyette lifted the price target on UWM Holdings Corporation (NYSE:UWMC) to $6.75 from $6.50, with an unchanged ‘Market Perform’ rating, according to TheFly. The firm appears reasonably constructive on the mortgage insurers, considering the projection that the enterprises will achieve double-digit book value growth, according to the analyst’s note.
On the other hand, Jeffrey Adelson from Morgan Stanley trimmed the price target on UWM Holdings Corporation (NYSE:UWMC) to $6 from $6.50, while keeping an ‘Equal Weight’ rating on December 16.
UWM Holdings Corporation (NYSE:UWMC) is a Michigan-based company specializing in origination, sale, and servicing residential mortgage lending. Founded in 1986, the company originates primarily from conforming and government loans.
5. B2Gold Corp. (NYSEAMERICAN:BTG)
Upside Potential as of December 19, 2025: 32.01%
Market Capitalisation: $8.27 billion
Number of Hedge Fund Holders: 37
As of December 18, B2Gold Corp. (NYSEAMERICAN:BTG) has a ‘Buy’ or equivalent rating from slightly more than half of the analysts covering the stock. With a target price range of $4.25 to $7.62, the median price target of $6 translates to an upside potential of 32.01% from the current price.
On December 10, Michael Siperco, an analyst at RBC Capital, reaffirmed a ‘Hold’ rating on B2Gold Corp. (NYSEAMERICAN:BTG), with a price target of C$6, which converts to approximately $4.35.
Earlier on December 1, Bank of America (BofA) named some North American miners it believes will benefit from the market trend ahead. According to the firm, gold prices will see a sharp uptick in 2026, with the metal anticipated to reach $5,000 per ounce as key macroeconomic drivers supporting prices remain in place.
BofA highlighted that “if gold matched the 2000s bull cycle, $7,000/oz could be upside,” while Michael Hartnett, the firm’s investment strategist, described gold as a “top trade for 2026,” having a forecasted 10% return. In light of this, the firm listed B2Gold Corp. (NYSEAMERICAN:BTG), among the others, “as having the highest gold price leverage,” on a NAV basis.
B2Gold Corp. (NYSEAMERICAN:BTG) is a Canadian gold producer operating the Fekola Mine, the Masbate Mine, and the Otjikoto Mine. Founded in 2006, the company also has a range of other evaluation and exploration assets in Mali and Finland.
4. BlackBerry Limited (NYSE:BB)
Upside Potential as of December 19, 2025: 29.31%
Market Capitalisation: $3.56 billion
Number of Hedge Fund Holders: 21
On December 19, RBC Capital maintained a ‘Sector Perform’ rating on BlackBerry Limited (NYSE:BB), with an unchanged price target of $4.50, which suggests an upside potential of approximately 19%. This follows the company’s third-quarter results, in which it exceeded not only RBC’s projections but also consensus estimates.
Although the outperformance was attributed to exceptional revenue from the company’s Secure Communications business rather than consistent growth across all its business segments, RBC highlighted that the company’s QNX platform appears to be gaining momentum.
The fourth-quarter guidance reflects a declining year-over-year growth rate from its previous double-digit pace, resulting in RBC reaffirming a neutral stance, citing its view that BlackBerry Limited (NYSE:BB) shares are “fairly valued relative to growth.”
In the third quarter, BlackBerry Limited (NYSE:BB) delivered an EPS of $0.05, 25% higher than the analyst guidance of $0.04, and a revenue of $141.8 million, surpassing the forecasted $135.6 million. Looking ahead, management expects revenue to be between $138 million and $148 million in the fourth quarter, and between $531 million and $541 million for FY26. What’s even more interesting is that the company anticipates continued double-digit growth in its QNX business, driven by widening opportunities in the automotive and robotics markets.
BlackBerry Limited (NYSE:BB) is a Canadian provider of intelligent security software and services to both enterprises and government organizations. Incorporated in 1984, the company operates through three segments: Secure Communications, QNX, and Licensing.
3. NIO Inc. (NYSE:NIO)
Upside Potential as of December 19, 2025: 41.20%
Market Capitalisation: $12.62 billion
Number of Hedge Fund Holders: 34
As of December 19, NIO Inc. (NYSE:NIO) has mixed analyst sentiment, with slightly more than 50% of analysts covering the stock assigning a Buy rating, nearly 40% holding a cautious view, and the remaining 3% recommending a Sell. While the target price ranges from $4.03 to $9.10, the median price target of $7.04 reflects an upside potential of 41.20%.
Among the 53% analysts recommending buying the stock is an analyst from Morgan Stanley, who maintained the ‘Buy’ rating on the company with a price target of HK$54 on December 7. When converted to $6.94, the price target translates to an upside potential of approximately 39%.
When NIO Inc. (NYSE:NIO) announced its third-quarter results, it reported an EPS of ¥-1.140 (RMB), ¥0.45 higher than the consensus forecast of ¥-1.590, and a revenue of ¥21.79 billion in contrast to the analyst estimate of ¥22.3 billion. Since then, several analysts have revised their outlook. On November 25, BofA Securities trimmed the price target on the company, with an unchanged Neutral rating. On the same day, Macquarie downgraded the company to Neutral from Outperform, with a reduced price target from $6.70 to $5.30.
During the earnings call, management reaffirmed the company’s commitment to “a battery electric vehicle roadmap featuring chargeable, swappable, and upgradable batteries.” With that said, NIO Inc. (NYSE:NIO) forecasts fourth-quarter revenue between ¥32.760 billion and ¥34.000 billion relative to the consensus guidance of ¥34.700 billion.
NIO Inc. (NYSE:NIO) is a Chinese company specializing in smart electric vehicles. Incorporated in 2014, the company offers electric SUVs, smart electric sedans, power solutions, Power Swap, and Power Charger and Destination Charger.
2. Cosan S.A. (NYSE:CSAN)
Upside Potential as of December 19, 2025: 48.37%
Market Capitalisation: $3.65 billion
Number of Hedge Fund Holders: 9
On December 16, Fitch Ratings maintained Cosan S.A. (NYSE:CSAN)’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ’BB,’ and updated the outlook to negative from stable. According to the statement, the rating agency reaffirmed the unsecured debentures at ’AAA(bra)’ and National Scale Rating at ’AAA(bra).
The agency cites several reasons for this weak guidance, including the company’s high leverage and sustained dependence on asset sales. Fitch Ratings notes that the earlier BRL10.5 billion follow-on completion offers “relief to Cosan as it advances its divestment strategy, aiming to deleverage the company over the next three years.”
On the positive side, the company’s cash flow is expected to turn modestly positive in the years ahead, thanks to declining debt levels and lower interest rates. The agency projects an annual average dividend of BRL 2.3 billion to Cosan S.A. (NYSE:CSAN), primarily from the subsidiaries of Compass and Rumo.
Earlier on December 5, HSBC upgraded Cosan S.A. (NYSE:CSAN) to Hold from Reduce and kept a price target of $5. The firm cited the company’s recent equity offering, which has led to favorable advancements to the company’s C-level executives and Board structure, thus supporting increased governance scrutiny from new partners.
Cosan S.A. (NYSE:CSAN) is a Brazilian company specializing in the fuel distribution business. Founded in 1936, the company operates through five segments: Raízen, Compass, Moove, Rumo, and Radar.
1. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)
Upside Potential as of December 19, 2025: 64.32%
Market Capitalisation: $2.31 billion
Number of Hedge Fund Holders: 19
On December 19, TheFly reported that Cathie Wood’s ARK Investment has acquired 755,538 shares of Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) in a $3,354,588 transaction. This purchase is a testament to the ARK’s growing interest in the biotech sector and aligns with its aim to invest in innovative companies.
Earlier, on December 17, JPMorgan upgraded Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) from Neutral to Overweight, while increasing its price target to $11.00 from $10.00. This follows the company’s promising results from MEK 1/2 inhibitor, REC-4881, which showcased robust efficacy in FAP patients during the TUPELO trial. The firm believes that the addressable patient population for the treatment is larger than previously anticipated.
JPMorgan sees huge potential for REC-4881 in the United States, forecasting peak sales surpassing $1 billion with a 60% probability of success. Additionally, the investment bank highlighted REC-617, a CDK7 inhibitor that demonstrates early anti-tumor activity in platinum-resistant ovarian cancer. What further strengthens the company’s AI-driven pipeline are pharmaceutical partnerships, which have generated more than $500 million in milestone payments to date.
Overall, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) has a ‘Hold’ or equivalent rating from 63% of the analysts covering the stock. With a median price target of $7, the stock has an upside potential of 64.32%.
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is a Utah-based clinical-stage biotechnology company specializing in the decoding of biology and chemistry. Founded in 2013, the company develops REC-994, REC-2282, and REC-4881, among others.
While we acknowledge the potential of RXRX to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than RXRX and that has 100x upside potential, check out our report about this cheapest AI stock.
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