We recently compiled a list of the 10 Best Penny Stocks to Buy Under $1. In this article, we are going to take a look at where Lyra Therapeutics, Inc. (NASDAQ:LYRA) stands against the other penny stocks under $1.
Penny stocks are defined by the Securities and Exchange Commission (SEC) as stocks that trade for less than $5 per share. They exhibit high price volatility due to their low pricing. Even a slight movement in the stock price can translate into a substantial percentage gain. Despite this advantage, it’s important to be aware of the risks associated with penny stocks. A study conducted by the Securities and Exchange Commission (SEC) found that most penny stocks are speculative and have low liquidity, which makes it challenging to trade them. Only around one in 1,000 penny stocks goes on to become profitable mid-cap or large-cap businesses, according to the study. Therefore, even if penny stocks seem attractive, investing in them needs a thorough assessment of the dangers as well as the possible benefits.
Penny stocks may provide large profits, with particular industries expected to develop in 2024 as a result of technological improvements, legislative changes, and altering customer tastes. These dynamic industries may be of interest to investors looking to diversify their portfolios or seek strong growth potential.
Among the industries where one might look for penny stocks to purchase in 2024 is renewable energy. It has experienced tremendous growth in recent years. The global renewable energy industry was estimated at $1.21 trillion in 2023, with a compound annual growth rate (CAGR) of 17.2% between 2024 and 2030, per Grand View Research. In 2023, Asia Pacific had a noteworthy revenue share of 40.98%.
The IEA’s Renewables 2023 study states that in 2023, the capacity of renewable energy worldwide increased by 50% to approximately 510 GW, with solar photovoltaics accounting for three-quarters of these increases. Leading the way, China added twice as much solar PV as the rest of the world in 2022 and had a 66% rise in wind power. According to IEA 50, renewable energy capacity increased at unprecedented rates in Brazil, the United States, and Europe. As per the latest IEA research, under present policies and market circumstances, worldwide renewable capacity would rise by two and a half times by 2030. Hence, investors may interact with innovative companies at the forefront of solar, wind, and other renewable technologies by purchasing penny stocks in the renewable energy space.
Biotech penny stocks also provide a unique investment opportunity for investors interested in medical innovation and the potential of major breakthroughs in healthcare. Recent analysis by investment bank Jefferies indicates that biotechnology businesses raised about $10 billion in follow-on stock offerings in January and February, signaling increased optimism in the industry.
The size of the worldwide biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion, per Precedence Research. Currently, the biotechnology industry consists of 673 publicly traded stocks, including penny stocks, with a combined market capitalization of $1,511.21 billion.
Investors interested in biotech stocks may question which sectors are prone to buyouts. Laura Chico, Senior Biotechnology Analyst at Wedbush Securities, noted key areas to keep an eye out for possible buyouts:
“Obesity has been a really big theme in 2023, and will probably continue for the foreseeable future, but across the area, at least in these recent M&A transactions, it’s been really broad-based, and I think that’s really a testament to the innovation in the space. We have several deals in oncology, immunology, inflammation, neuro, and even rare diseases. So it’s not just within certain verticals at this point.”
Methodology:
In this article, we first used a stock screener to list down all stocks trading under $1 (as of the writing of this article) with over 40% institutional ownership. From the resulting dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks.
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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A scientist working in a modern laboratory, researching the latest drug delivery systems.
Lyra Therapeutics, Inc. (NASDAQ:LYRA)
Number of Hedge Fund Investors: 27
Lyra Therapeutics, Inc. (NASDAQ:LYRA), a clinical-stage biotechnology company, specializes in the development and commercialization of innovative integrated drug and delivery systems for the localized treatment of patients with ear, nose, and throat diseases. It’s XTreo technology platform is intended to deliver medications directly to the damaged tissue for extended periods of time with a single dose. The company’s product candidates include LYR-210, an anti-inflammatory implanted drug matrix for the treatment of chronic rhinosinusitis (CRS), which is in Phase III clinical trials, and LYR-220 for CRS patients with or without nasal polyps. It has signed a partnership agreement with LianBio Inflammatory Limited to develop and commercialize LYR-210 in mainland China, Hong Kong, Taiwan, Macau, South Korea, Singapore, and Thailand. The company generates collaboration revenue.
Four years ago, the stock price of this company was $18.56; today, it is only $0.29. Its market capitalization is currently $16.50 million, however, three years ago, its value was over $147.40 million. It has lost 98% of its value as of July 10. LYRA is a cash-burning company with a high burn rate and poor sales. It has lost about $22 million in cash since 2020, and its sales need to be stronger to make up for this deficit. When the company’s phase 3 study for LYR-210 failed to reach the primary goal, shares fell by 92% in May 2024. The firm is planning rapid labor cutbacks and operational modifications in order to preserve cash. For example, it recently announced the implementation of a layoff of approximately 75% of its workforce.
Positive updates from phase 2 trials and perhaps good phase 3 findings have resulted from Lyra Therapeutics’ (NASDAQ: LYRA) unique XTreo technology. The company’s cash balance is $104.15 million, allowing it to operate until 2025. In Q1 2024, LYRA’s financial growth was noteworthy. Revenue climbed by 29.76% from $410,000 to $532,000 in the same quarter of the previous year. Advances and promising results from clinical studies, especially the ENLIGHTEN 1 Phase 3 study of LYR-210 in chronic rhinosinusitis (CRS), contributed to Lyra Therapeutics increased revenue. Furthermore, there were no unfavorable product-related occurrences, indicating a positive safety profile for the company.
LYRA’s annual revenue has been consistently growing YoY over the past three years, by 378.25% in 2022, 14.31% in 2023, and 28.74% in TTM. Lyra Therapeutics, Inc (NASDAQ: LYRA) in the mental health industry is constantly making efforts to make mental care accessible to as many patients across the nation as possible. Hence, analysts are bullish, and they believe that the company’s efforts are yielding results in the financial area.
Currently trading at $0.29, Lyra Therapeutics, Inc. (NASDAQ:LYRA) has an average price target of 4.50 and a “buy” recommendation from analysts, suggesting an upside potential of 1,437.41% for investors.
27 out of the 920 hedge funds in Insider Monkey’s database had stock in LYRA. Joseph Edelman’s Perceptive Advisors is the largest stakeholder in the company, with 12,757,562 shares worth $79.35 million.
Overall LYRA ranks 2nd on our list of the best penny stocks to buy under $1. You can visit 10 Best Penny Stocks to Buy Under $1 to see the other penny stocks that are on hedge funds’ radar. While we acknowledge the potential of LYRA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LYRA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.