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Stocks under $3 sound attractive to investors for several reasons. First, even with a small corpus, a diversified portfolio of high-risk stocks can be created. Further, when looking at sub-$3 stocks, there is a high probability of exposure to early-stage companies. If these businesses deliver, the valuations can explode and a multibagger return is likely.
At the same time, investors should remain cautious among a sea of speculative stocks below $3 that have below average trading fundamentals. Some prefer to avoid these purely speculative names and consider exposure to ideas that can be massive value creators supported by fundamental developments.
The next best stocks below $3 may witness a big rally next year because they are deeply undervalued. Additionally, positive business catalysts can trigger a massive price increase.
Let’s discuss the reasons to be bullish on these stocks.
Tilray Marks (TLRY)
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Tilray Brands (NASDAQ:TLRY) stock has been depressed and has corrected by 50% in the last 12 months. However, TLRY stock is poised for a big rally in the coming quarters.
First, a new bill to legalize marijuana was introduced in the US House of Representatives. Any possibility of federal-level legalization in the next 24 months would imply multiple returns for the stock.
Further, Tilray was focused on diversification. With multiple acquisitions, Tilray is now the fifth largest craft brewer in the United States. This segment is likely to support growth acceleration. Also, a presence in the US beer and beverage industry provides Tilray with a solid strategic infrastructure for cannabis expansion.
Another reason to be bullish on Tilray is improving financial metrics. The company guided for positive adjusted free cash flow in financial year 2024. At the same time, Tilray saw a boost in international cannabis revenue. With a widely addressable market and a strong liquidity buffer, TLRY stock looks deeply undervalued.
EVGO (EVGO)
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Year to date (YTD), most electric vehicle (EV) charging infrastructure stocks have trended lower, although a 2024 reversal is likely due to stellar growth supported by margin improvement. EVgo (NASDAQ:EVGO) stock is among the attractive names to consider after a 54% correction in the last 12 months. Also, the stock has short interest of 25% of the free float, which could signal a massive short rally.
For Q3 2023, EVgo reported revenue growth of 234% year over year (YAY) to $35.1 million. Network throughput increased to 37GWh compared to 12GWh in Q3 2022. Notably, by the end of the quarter, EVgo had 3,400 booths in operation or under construction. As new booths become operational, strong revenue growth is likely to continue through 2024.
On the upside, EVgo reported an adjusted EBITDA loss of $14.2 million. However, YOY EBITDA level losses narrowed, a trend likely to continue. EVgo has $229 million in cash and equivalents as of Q3, and if the company can turn EBITDA positive in the next few quarters, the stock is likely to explode.
Blade Air Mobility (BLDE)
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Blade Air Mobility (NASDAQ:BLDE) is trading just above $3 after a sharp rally of 45% in the last month. Perhaps an intermediate correction would be a good opportunity to rally the stock. Backed by strong financial developments, BLDE stock is likely to trend higher in the next 12 months.
The company focuses on urban air mobility, providing air transportation alternatives around congested ground routes in the United States. With an asset-light model, the business looks attractive with stellar growth likely to be sustainable.
Furthermore, Blade Air Mobility reported a 56% increase in revenue for Q3 2023 to $71.4 million. Additionally, BLDE achieved adjusted EBITDA profitability during the quarter. If key margins continue to improve next year, the share price action is likely to be significant. Optimists point to growth and margin improvement as the company focuses on the passenger and medical segment. The latter segment is likely to be a major growth catalyst and EBITDA margin driver.
As of 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 InvestorPlace.com’s Publishing Guidelines.
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 written over 1,500 stock specific articles with a focus on the technology, energy and commodities sector.
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