Are these crashing penny stocks now explosive bargains?

High-flying penny stocks are crashing, but which ones can bounce back? Zaven Boyrazian explores two UK shares that might now be too cheap.

| More on:
Abstract 3d arrows with rocket

Image source: Getty Images

With the stock market having a bit of a tantrum, plenty of penny stocks have seen their valuations get wiped out relatively quickly. In some cases, the rapid drop in price is justified. But now that prices have sunk, are there exciting buying opportunities for my portfolio? Let’s take a look.

A leader in hydrogen penny stocks

ITM Power (LSE:ITM) was the darling of the penny stocks community in early 2021, reaching higher than 700p per share. Today, popularity has dwindled, with shares now standing at around 278p.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

As a reminder, this business is a designer and manufacturer of specialised electrolyser technology that can extract hydrogen from water without producing any greenhouse gas emissions. Needless to say, that’s significantly better for the environment versus the traditional method of capturing the element from hydrocarbons (fossil fuels).

I’ve actually explored this business numerous times, complimenting its seemingly impressive technology. However, my primary concern was the valuation. And looking back, it seems I was right to be wary. But now that the stock has more than halved, is it a good time to add this business to my portfolio?

Maybe. Even with the recent tumble, the stock is by no means cheap. Over the last six months, revenue came in at £4.1m. And while that is almost the same as the £4.3m generated in the whole of its 2021 fiscal year, I feel there’s a long way to go before this penny stock can justify its £1.65bn valuation.

Therefore, even though this may later turn out to be a bargain price, I’m keeping ITM Power on my watchlist for now.

Exploring opportunities in the FTSE 100

While the FTSE 100 may be home to some of the largest businesses in the UK, that doesn’t mean they’re immune to double-digit declines. And recently, the index has gained quite a few penny stocks as a consequence.

That’s certainly true for ITV (LSE:ITV), with its share price falling by nearly 50% over the last 12-months to around 70p today. What happened?

There are undoubtedly multiple factors at play. But it seems investors are a bit concerned over management’s new strategy – most specifically, the cost of deploying it. The group aims to double its digital revenue by 2026 by launching a new ad-supported streaming service called ITVX. Unfortunately, the capital investment required stands in the billions, with £1.23bn being invested this year, followed by £1.35bn each year thereafter.

Investing such vast amounts of capital into ITVX obviously comes with considerable risk. And some analysts believe the leadership team is just setting money on fire due to the immense level of competition already in the streaming arena.

However, personally, I’m cautiously optimistic. The company has a track record of creating popular content. And with shares falling so sharply into penny stocks territory, the P/E ratio now stands at 7.3. That, to me, looks like a bargain. Therefore, I am considering adding a small position to my portfolio today.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Woman calculating figures next to a laptop
Investing Articles

Is the Aviva share price on the verge of recovery?

The Aviva share price has been creeping back. What does the latest Q1 update say about the long-term future?

Read more »

Silhouette of digger
Investing Articles

Should I buy Rio Tinto shares for the monster dividend?

Rio Tinto is one of the highest-yielding shares in the FTSE 100. Edward Sheldon looks at whether he should buy…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Should I buy Marks and Spencer shares today?

Shares in Marks and Spencer Group have experienced a huge pullback in 2022. Edward Sheldon looks at whether this is…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Has the ASOS share price bottomed?

After a massive fall, ASOS shares have started to edge back. Edward Sheldon discusses whether the stock has now bottomed.

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

An under-the-radar FTSE 100 stock to combat stagflation fears

As the share price of this blue-chip FTSE 100 stock falls below Covid-levels, why I added it to my portfolio.

Read more »

Man smiling and working on laptop
Investing Articles

This stock market sell-off could be my buying opportunity of the decade

The market sell-off has been brutal, but this Fool thinks it offers him a compelling opportunity to make big money.

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

After falling 60%, is the Ocado share price a bargain?

The Ocado share price has fallen heavily in the past year. But our writer is still not buying it for…

Read more »

Hedge shaped as the pound symbol inside a glass piggy bank
Investing Articles

A question investors need to ask about the Woodbois share price

The Woodbois share price has declined a little from its peak in early May. Does that mean I should buy…

Read more »