2 Penny Stocks That Wall Street Thinks Can Gain 118% to 160% From Here
Penny stocks are shares of small companies that trade for less than $5 per share. The advantage of investing in penny stocks is that you can buy a large number of shares for a small sum of money, and if the underlying company succeeds, the return on investment can be significant.
However, they can be very volatile and hence very risky. Investors who can stomach these risks may find these 'Strong Buy'-rated penny stocks appealing over the long run.
Penny Stock #1: Lantronix
With a market cap of $88.4 million, Lantronix (LTRX) is a technology company that makes devices that connect sensors, machines, and systems to the internet. These products are widely used in industrial automation, smart cities, healthcare, and transportation. It also offers software solutions that enable secure data access and management in the Internet of Things (IoT) and remote computing environments. While fiscal 2024 showed strong growth, recent quarters have been challenging.
The stock is down 45.8% year to date, while the S&P 500 Index ($SPX) is up 0.5%. Nonetheless, Wall Street rates the stock as a 'Strong Buy' with upside potential of more than 115%.
In fiscal 2024, Lantronix achieved significant milestones, with annual revenue rising 22% year-over-year to $160.3 million, with a 74% increase in adjusted earnings to $0.40 per share.
However, the momentum from fiscal 2024 did not carry into fiscal 2025. In the most recent third quarter, total revenue fell 30.8% to $28.5 million, while adjusted earnings per share fell to $0.03 from $0.11 in the year-ago quarter. The company attributed the declines to macroeconomic challenges and restructuring efforts.
Management stated that the company will continue to invest in high-growth areas like AI-enabled gateways and 5G connectivity. Lantronix is actively pursuing strategies to regain its growth trajectory. In the third quarter, it launched the Open-Q 8550CS System on Module (SoM), built on Qualcomm's (QCOM) QCS8550 processor, which targets next-generation industrial and robotics applications.
The company has also hired new executives to spearhead strategic expansion. Furthermore, it has collaborated with Teledyne/FLIR to enable AI-driven drone thermal cameras, demonstrating the capabilities of its Open-Q platform in mission-critical edge vision systems. These initiatives are intended to position Lantronix favorably in the evolving IoT landscape. Analysts expect Lantronix revenue and earnings to fall for the full year fiscal 2025. However, revenue and earnings could increase by 3.2% and 38% in fiscal 2026.
On Wall Street, of the five analysts that cover Lantronix stock, four rate it a 'Strong Buy,' while one recommends a 'Moderate Buy.' Needham analyst Ryan Koontz believes that while the recent quarter produced mixed results and a cautious outlook due to macroeconomic uncertainty, these challenges are temporary. He sees Lantronix's strategic shift to edge AI and compute applications as a key driver of future success. However, reflecting this balanced view, he reduced the price target to $4.50 while maintaining his 'Buy' rating. The mean target price for the stock is $4.90, which is 118% above current levels. The Street-high estimate of $8 implies upside of 257% over the next 12 months.
Lantronix's fiscal 2024 performance demonstrated its potential in the IoT market. However, given the company's fiscal 2025 performance, investors should keep an eye on whether it can reestablish its growth trajectory in the highly competitive IoT market.
Penny Stock #2: Ceragon Networks
With a market cap of $206 million, Ceragon Networks (CRNT) is a global provider of wireless backhaul solutions. It specializes in high-capacity, cost-effective wireless transport for mobile operators and private networks. Ceragon stock is down 50% year-to-date, compared to the broader market index.
In 2024, Ceragon reported revenues of $394.2 million, up 13.5% year on year. The company reported its highest revenue since 2012, thanks to strong demand in India and an increase in private network deployments. In the first quarter of 2025, Ceragon reported revenues of $88.7 million, a slight increase of 0.2% year-over-year. However, adjusted earnings per share fell to $0.03, compared to $0.05 in the year-ago quarter. Ceragon has introduced several innovative products to bolster its market position, including millimeter-wave solutions like the IP-50EX and IP-50CX.
In February, Ceragon completed the acquisition of End 2 End (E2E) Technologies, a U.S.-based systems integration and software firm specializing in private networks for the energy and utilities sectors. The acquisition is expected to contribute $15 million to $19 million in revenues for 2025 and be accretive to non-GAAP earnings in the second half of the year. Ceragon has set a revenue guidance range of $390 million to $430 million for 2025, including contributions from the E2E acquisition. Analysts predict revenue growth to be roughly 7.9% in 2026, followed by earnings growth of 44.6%.
On Wall Street, of the five analysts that cover Ceragon stock, four rate it a 'Strong Buy' while one recommends a 'Moderate Buy.' The mean target price for the stock is $6.10, which is 160% above current levels. The Street-high estimate of $10 implies upside of 327% over the next 12 months.
With the ongoing expansion of 5G networks and rising demand for high-speed data transmission, Ceragon's long-term prospects are promising. However, as a penny stock, investors should closely monitor the company's strategic plans and ability to navigate the competitive telecommunications market.
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