Top Tech Penny Stocks

The top tech penny stocks, trading at $5 per share or less, include car data company Otonomo Technologies Ltd., quantum computer company IonQ Inc., and 3-D printing firm Nano Dimension Ltd.. They 're outperforming peers in revenue growth even as the benchmark S&P 600 Information Technology Sector Index dropped by more than 11% in the past year, in line with the decline of the Russell 1000 Index, as of Dec. 2.

Here are the top tech penny stocks in three categories: best value, fastest growth, and best performance. All statistics in the tables below are also as of Dec. 2.

Best Value Tech Penny Stocks

These are the tech penny stocks with the lowest 12-month trailing (TTM) price-to-sales (P/S) ratio. For companies in early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales eventually could produce more profit when it either achieves or returns to profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.

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• Avaya Holdings Corp.: Avaya provides digital communications services to corporations, including cloud, voice, email, video, and performance management tools. Becky Roof became interim CFO of Avaya in November, succeeding Kieran McGrath. Roof was previously managing director at consulting firm AlixPartners LLP. Avaya hasn't provided a timeline for appointing a permanent CFO.
• Diebold Nixdorf Inc.: Diebold sells hardware, services and software to financial companies and retailers to provide financial services to consumers. Diebold Nixdorf recently announced a multi-year contract with Saudi Arabian self-service banking company Alhamrani Universal to provide cash dispensers, recycling technology, and monitoring services. Terms of the deal were not disclosed.
• Loyalty Ventures Inc.: Loyalty offers customer loyalty enhancement services globally to the financial and retail industries and to other consumer-related businesses.

Fastest Growing Tech Penny Stocks

These are the tech penny stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors pick out growing startups that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability. Many smaller companies post losses over a sustained period as they invest in growing their market share and revenue. Companies with sales growth of 2,500% or more have been excluded from our list as outliers.

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• Otonomo Technologies Ltd.: Otonomo is an Israeli car data company that operates an exchange platform and marketplace used by manufacturers, app developers, and service providers to share vehicle data. The company reported widening operating losses in the third quarter as revenue soared to $2.0 million. The number of fleet vehicles on the platform grew by 4.5 times during the period.
• IonQ Inc.: IonQ is a software company focused on developing quantum computers that can produce longer, more sophisticated calculations with a smaller number of errors for commercial and industrial applications.
• Nano Dimension Ltd.: Nano is an Israeli and American 3-D printing company that sells additive manufacturing electronics systems to sectors including consumer electronics, medical devices, automotive, and more. Nano's operating losses widened in the most recent quarter as revenue surged, driven by growth in all of its product lines.

Tech Penny Stocks with the Best Performance

These are the tech penny stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.

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• Conduent Inc.: Conduent sells human resources and other business services to customers in the industrial, transportation, and government sectors, including more than 500 government entities. The company recently launched a series of fraud-prevention services as well as a cloud-based service aimed at accelerating the eligibility and enrollment process for government social services and aid programs.
• SunHydrogen Inc.: SunHydrogen develops technology to produce green hydrogen using only sunlight and water. The company recently announced that it received a $45 million investment from GHS Investments LLC to support further technology development.
• Edgio Inc.: Edgio's delivery network and related services distribute content over the Internet. Edgio says its products drive about 20% of worldwide internet traffic for movies, TV shows, sports, and other entertainment.

Advantages of Tech Penny Stocks

Growth Potential: Tech penny stocks provide significant growth potential due to their micro market capitalizations and product adoption prospects. For example, in December 2021, shares in video streaming and linear TV company SeaChange International, Inc. (SEAC)—which had a market cap of just $36.86 million at the time—spiked 359% after rumors surfaced that it would merge with video-sharing social networking service Triller. Although the merger failed to eventuate, it highlights the rapid growth potential of tech penny stocks.

Smaller Investment: Investors don't need much capital to start trading tech penny stocks. A few hundred dollars can buy thousands of shares, allowing investors to profit quickly if the price moves in their favor. For instance, a trader who invests $200 into a 5-cent stock receives 4,000 shares. If the stock doubles in price, the trader has made a 100% gain on their small initial investment. By comparison, if the trader invested the same amount in a large-cap tech stock like Apple Inc. (AAPL), they could buy only one share, making it difficult to generate significant returns on their starting capital.

Risks of Technology Penny Stocks

Less Regulation: Tech penny stocks that trade over-the-counter (OTC), such as pink sheet listings, carry significantly higher risks than those that trade on regulated exchanges. Smaller tech companies may choose to sell their shares OTC to avoid the higher costs and regulatory requirements of listing on a major exchange like the Nasdaq. Fewer reporting obligations could make it difficult to find the necessary financial information to make informed decisions before investing in these stocks. Those who trade via OTC networks should ensure that they conduct their due diligence on the tech penny stocks they invest in to reduce the chance of getting scammed.

Low Liquidity: Tech penny stocks typically trade significantly less volume than their larger-cap counterparts due to fewer market participants following these smaller companies. Lower volume can make it difficult to enter and exit positions, especially when the stock price falls sharply and traders are looking to exit their positions as quickly as possible. Insufficient liquidity can also increase trading costs through wider bid/ask spreads. For instance, a trader wanting to purchase a tech penny stock with a 50-cent to 75-cent bid/offer faces a 50% spread to execute a market order. Finally, thinner trading volumes make it easier for bad actors to manipulate the prices of tech penny stocks, which can cause sudden volatility spikes.

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