Penny stocks are always risky bets due in-part to limited public knowledge about the issuing companies. The Reddit community wallstreetbets (WSB) is currently showing an interest in penny stocks Sundial Growers (NASDAQ:SNDL), Naked Brand Group (NAKD), and FSD Pharma (HUGE). But we think these companies’ poor financials and bleak growth potential make their stocks best avoided now.Penny stocks are considered high-risk/high-return investments. Generally priced at less than $5, many of these stocks gain significantly to deliver three- and four-digit returns. However, these stocks often carry big risks because the issuing companies are typically not experienced in their respective operating fields. Furthermore, penny stocks priced below $1 often carry the risk of being delisted from major stock exchanges due to stringent eligibility conditions related to share price with respect to a company maintaining its listing. But penny stocks generally perform well during periods of economic recovery because the companies are afforded an opportunity to expand their production and sales and, by extension, their market reach.
However, various macroeconomic measures, such as rising inflation, lower-than-expected job growth and sky-high commodity prices, are currently pointing to a market pullback.
Against this backdrop, Reddit community wallstreetbets has been showing interest in penny stocks Sundial Growers Inc . (SNDL), Naked Brand Group Limited (NAKD), and FSD Pharma Inc. (HUGE). But, given their poor financials and bleak growth prospects, we think these stocks are best avoided now.