Top Tech Penny Stocks for Q2 2023

RXT, GRAB, and DIDIY lead for value, growth, and performance, respectively

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The top tech penny stocks, trading at $5 per share or less, include cloud-computing company Rackspace Technology Inc., "superapp" developer Grab Holdings Inc., and ride-sharing company DiDi Global Inc.

They have outperformed peers in terms of value, growth, and performance, respectively, over the past year. Shares of many tech penny stocks have fallen in the last year amid a broader slowdown in the sector, while the benchmark Invesco S&P SmallCap Information Technology ETF (PSCT) has fallen 2% and the Russell 1000 Index has dropped by 8%.

Here are the top tech penny stocks in three categories: best value, fastest growth, and best performance. All statistics throughout are as of April 6.

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.

Best Value Tech Penny Stocks
  Price ($) Market Capitalization (Market Cap) ($M) 12-Month Trailing P/S Ratio
Rackspace Technology Inc. (RXT) 1.77 376.7 0.1
Conduent Inc. (CNDT) 3.33 727.3 0.2
Compass Inc. (COMP) 3.20 1.5 0.2

Source: YCharts

  • Rackspace Technology Inc.: Rackspace Technology is a cloud computing company that provides multi-cloud solutions to help businesses manage their applications, data, and information security infrastructure. Rackspace reported revenue of $3.1 billion in 2022, up 4% year over year on new customer acquisitions and growing customer spending. The company's stock plunged in the last year on disappointing earnings results.
  • 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. Revenue fell by 6% for the fourth quarter of 2022 amid inflation and interest rate increases, while Conduent stock approached a three-year low in March.
  • Compass Inc.: Compass is a real estate technology firm that operates an online platform to help sell, buy, and rent real estate. Compass shares have lost more than half their value in the last year on missed earnings estimates and weak guidance.

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 (EPS) 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 1,000% or more have been excluded from our list as outliers.

Fastest Growing Tech Penny Stocks
  Price ($) Market Cap ($M) Revenue Growth (%)
Grab Holdings Inc. (GRAB) 3.03 11,635.2 311.5
Stem Inc. (STEM) 4.92 750.5 194.5
Velo3D Inc. (VLD) 1.95 375.2 186.1

Source: YCharts

  • Grab Holdings Inc.: Based in Singapore, Grab Holdings provides a "superapp" in countries throughout Southeast Asia, offering delivery, financial, business, and mobility services. For the full year of 2022, the company reported year-over-year revenue growth of 112%, reaching an annual total of around $1.4 billion. Revenue growth was driven by the company's Mobility and Deliveries segments, among other factors.
  • Stem Inc.: Stem is a clean energy tech company that operates an AI-based software platform for the management of clean energy assets including solar, EV fleet charging, and more. Stem's revenue almost tripled for the final quarter of 2022 on gains in hardware sales thanks to partnership agreements.
  • Velo3D Inc.: Velo3D is a metal 3D printing technology firm offering print preparation software, printers and other hardware, and quality control services. Revenue of $29.8 million for the last quarter of 2022 was almost triple that of the prior year's quarter. Increases in system volume and average selling prices helped to drive performance.

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.

Tech Penny Stocks With the Best Performance
  Price ($) Market Cap ($M) 12-Month Trailing Total Return (%)
DiDi Global Inc. (DIDIY) 3.89 18,882.2 49.6
Nokia Oyj (NOK) 4.87 27,196.5 -8.4
Real Matters Inc. (REAL.TO) CA$4.58 CA$332.9 -10.2
Russell 1000 Index N/A N/A -7.7
Invesco S&P SmallCap Information Technology ETF (PSCT) N/A N/A -1.8

Source: YCharts

  • DiDi Global Inc.: DiDi Global is a Chinese ride-sharing company with a presence in Asia, Latin America, Europe, and Africa. It also offers food delivery, intra-city freight, and financial services. DiDi shares rose in recent months as the Chinese government has eased restrictions on its user registration process, but the stock remains down substantially compared with several years ago.
  • Nokia Oyj: Nokia is a Finnish technology, communications, and consumer goods company providing mobile phones, network infrastructure, software, and similar products. Nokia is benefiting from demand from phone companies for its 5G network infrastructure even as it has missed profit forecasts.
  • Real Matters Inc.: Real Matters is a Canadian real estate software platform provider. It offers property valuation, risk management, data analytics, and related services to appraisers, lenders, and originators in North America.

Advantages of Tech Penny Stocks

Growth Potential: Tech penny stocks provide significant growth potential due to their micro market capitalizations and product adoption prospects.

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.

Article Sources
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  1. YCharts. “Financial Data.”

  2. Rackspace Technology. "About Rackspace Technology."

  3. Rackspace Technologies. "Rackspace Technology Reports Fourth Quarter and Full Year 2022 Results."

  4. Barron's. "Rackspace Earnings Disappoint. The Company Is No Longer for Sale."

  5. Conduent. "Homepage."

  6. Conduent Inc. "Conduent Reports Fourth Quarter and Full Year 2022 Financial Results."

  7. NASDAQ. "Why Compass Stock Was Falling Today."

  8. Grab. "Homepage."

  9. Grab. "Grab Reports Fourth Quarter and Full Year 2022 Results."

  10. Stem Inc. "Stem Announces Fourth Quarter and Full Year 2022 Results."

  11. Velo3D Inc. "Velo3D Announces Fourth Quarter and Fiscal Year 2022 Financial Results."

  12. DiDi Global. "About Us."

  13. Barron's. "China Eases Restrictions on Didi. It’s Good News for Tech Stocks."

  14. Reuters. "Nokia quarterly operating profit lags expectation as margin drops."

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