OVID - 3 Sorry Penny Stocks to Sell in May While You Still Can

2024-05-28 13:09:08 ET

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Investors should focus on these penny stocks to sell in May to avoid potential losses. While more affordable and often appealing to investors with limited capital, Penny stocks can also carry significant risks. These companies typically have tiny market caps and cheap valuations, leading to high volatility and the potential for substantial losses.

Many penny stocks lack the resources, management expertise or competitive advantages needed for sustained long-term growth, increasing the risk of failure.

With that said, here are three penny stocks to sell in May. These companies might not have the stability or growth potential to make them worthwhile investments, making them risky choices for investors.

There are some great names out there for high-risk investors. However, at some point, the likelihood of success is so narrow it no longer makes sense to bet on these names for a turnaround.

Here are the top penny stocks to sell.

Mullen Automotive (MULN)

Mullen Automotive (NASDAQ: MULN ) is an electric vehicle manufacturer. The company has faced substantial financial challenges, including a significant net loss in the past year.

The company’s revenue for the fiscal year was minimal , with only $366,000 generated from vehicle sales. Operating expenses were exceedingly high, totaling $377.8 million, which included significant amounts spent on general and administrative expenses.

Additionally, Mullen faced substantial non-cash operating expenses, amounting to $272.0 million and $698.4 million for the three and nine months ended June 30, 2023, respectively. The company’s financial instability is further exacerbated by impairments recorded due to unfavorable market conditions and the decline in the market price of its common stock. These impairments totaled $84.6 million.

MULN is an intriguing option in the EV space. Still, due to these risks and uncertainties, I don’t believe that investors should hold onto their shares of MULN, as the road forward will be extremely difficult due to the financial burden on the company.

Aeva Technologies (AEVA)

Aeva Technologies (NYSE: AEVA ) specializes in lidar sensing systems and autonomy-enabling software. The company has been operating at a significant net loss and has struggled to achieve substantial revenue growth.

For Q1 2024, Aeva reported a revenue of $2.1 million , up from $1.1 million in the same quarter the previous year. Despite this increase, the company continues to operate at a significant net loss. The GAAP net loss for Q1 2024 was $35.3 million, slightly higher than the $35.2 million in Q1 2023. The company’s GAAP operating loss remained nearly flat at $37.3 million, while the non-GAAP operating loss was $32.1 million?.

Aeva’s cash position also weakened, with cash, cash equivalents and marketable securities totaling $189.3 million at the end of Q1 2024, down from $221 million at the end of 2023.

Revenue forecasts for AEVA are also extremely optimistic and, in my view, not tied to reality. Revenues are expected to grow to $1.08 billion in FY2028, up from just a forecasted $8.08 million in 2024. A sell-off could be on the cards, as the analyst consensus could set it up for failure.

Ovid Therapeutics (OVID)

Ovid Therapeutics (NASDAQ: OVID ) develops treatments for neurological disorders. Despite ongoing clinical trials, the company has not achieved profitability, and its revenue remains minimal.

For the first quarter of 2024, Ovid reported revenue of $148,000 , primarily from royalty and licensing agreements. This was an increase from $66,000 in the same period in 2023. However, the company incurred a net loss of $11.7 million, or $0.17 per share, compared to a net loss of $13.4 million, or $0.19 per share, in Q1 2023.

Ovid’s research and development expenses rose to $10.4 million in Q1 2024, up from $6.6 million in Q1 2023, reflecting increased clinical activities, including the advancement of OV888 (GV101) and OV329 clinical programs.

While it has enough runway to last it until FY2026, its progress so far has been disappointing, and it underscores the risk of investing in drug treatment companies for investors.

On Penny Stocks and Low-Volume Stocks : With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More : Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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