These 5 Penny Stocks Just Surged Double Digits

May 16, 2024 at 08:35 AM EDT

penny stocks surge graphic

Meme stocks are back in focus, with Gamestop (NYSE: GME) and AMC Entertainment (NYSE: AMC) gaining triple digits in hours. The next great meme trade could be around the corner, and the stocks on this list could be the winners. They all surged by double digits, driven by catalysts with more meat than a picture posted on X. The caveat for investors is that these highly speculative stocks come with significant risks that could lead to losses for the unwary and gains for short-sellers.

Faraday Future Intelligent Electric Inc. - Short Squeeze In-play

Faraday Future Intelligent Electric (NASDAQ: FFIE) is up more than 100% on the day and quadruple digits since the rally began. The rally is driven by nothing more than short-covering due to a lack of other news. The company is involved with the EV market but has no product to speak of and a very high short interest in play.

The short interest is likely down since the last report but incredibly high then, nearly 100%, and the short sellers may be using this rally to reposition. The rally will eventually run out of steam because no meat is on this bone. Surprisingly, institutional ownership is high and includes names like Palantir Technologies (NYSE: PLTR), but investors should expect the group to lean toward sales with elevated share prices. No analysts rate this stock.

AEye Rises 200% After Results and Outlook

AEye (NASDAQ: LIDR) is a LIDR-focused robotics and autonomous vehicle company with rising shares. The company issued a favorable earnings report that validated its business, catalyzing the rally. The results were weak, but a new partnership opened the Chinese market, paving the way toward sustained revenue and profitability. Short interest is not a factor in the rally; short interest was less than 4% on April 30th.

No analysts rate LIDR stock; few institutions own it, but the names on the list are telling. Among the top holders are Intel (NASDAQ: INTC) and General Motors (NYSE: GM), which hold more than 10%. The price action post-release is favorable. The stock is up in a series of moves that align with a market reversal and sustained rally. The move is driven by high volume and may continue rising, although resistance is evident near $4.

Petco Health and Wellness Company Rises to the Occasion

Petco Health and Wellness Company (NASDAQ: WOOF) rose to the occasion, gaining 50% in days, due primarily to short-covering. The short interest is not as high as FFIE but still high at 20%, sufficient to fuel a squeeze. The question is whether the market can get above critical resistance at the $2.60 level, which looks unlikely. The analysts' consensus is above that level but falling compared to last year, last quarter, and last month, led lower by revisions. The recent revisions put this stock trading below $2, and they may be optimistic. Petco operates in a healthy market but faces intense competition from larger players like Chewy (NYSE: CHWY), which is diversifying and gaining market share in its sector.

iPower is a Small but Powerful eCommerce Retailer

iPower (NYSE: IPW) is a small eCommerce retailer with quarterly revenue below $25 million, but it is a powerful operator in its space. It provides gardening and growing light equipment for homes and businesses. The latest results include 15% top-line growth and a return to profitability that is expected to persist. Short interest is not a factor in this rally, but an analyst is. Roth MKM is the only analyst rating the stock tracked by Marketbeat. It rates this stock as a Buy and sees it trading near fair value at current levels, a potential cap for the market.

Canaan Sells Spare Parts to the Bitcoin Mining World

Canaan (NASDAQ: CAN) is surging on news its CEO and CFO would buy at least $2 million worth of their US-listed ADS. Each ADS is worth 15 class A shares and is a significant vote of confidence in the business. Rising Bitcoin prices support business and now, AI, which relies heavily on similar equipment. Short interest and short-covering are factors in this rally; results aren’t. The short interest rate was over 11% at the end of April; the company did not make money. However, analysts rate it as a Buy and see it increasing by 200% at the low end of the range so the rally could continue.

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