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Penny Stocks on Robinhood [2024]: Are They Worth the Risk?

Learn about the potential rewards and risks of investing in some of the best penny stocks on Robinhood and explore key opportunities and market trends shaping this volatile sector.

By Danielle Letenyei

Edited by Ashley Donohoe

Updated Dec. 17, 2024

Penny stocks can offer an attractive way to invest with little money and possibly see significant returns. However, investing in them is risky. Many penny stocks aren’t traded on major stock exchanges like Nasdaq and the New York Stock Exchange (NYSE), meaning they aren’t always required to disclose their financials to investors.

If you do want to invest in penny stocks, the Robinhood platform is a good place to do so.¹ <p>All investments involve risk including loss of principal. Interest is earned on uninvested cash swept from your brokerage account to program banks. Robinhood is not a bank. For margin enabled customers, to earn interest through the cash sweep program, a cash balance is needed. If you have a margin balance, there is no cash balance to earn interest.</p> The only penny stocks traded there are those traded on the major exchanges, which might make it slightly less risky.

A few of my picks for the best penny stocks on Robinhood include Genius Group Limited, Serve Robotics, and BranchOut Food, among a few others. Let’s look at these and three other recommended penny stocks to see why you might want to invest in them.

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Key takeaways

Penny stocks are stocks that usually sell for under $5 a share.
Most penny stocks are traded in over-the-counter (OTC) markets, which makes them riskier because there’s less oversight.
Robinhood only allows trading of penny stocks on major stock exchanges like Nasdaq and the NYSE.
In my opinion, some of the best penny stocks on Robinhood include Asset Entities, BranchOut Food, Genius Group Limited, Serve Robotics, Novavax, and Richtech Robotics.

Best penny stocks on Robinhood compared

	Stock ticker	Sector	YTD performance	Market cap
BranchOut Food Inc.	NASDAQ: BOF	Food technology	+86.07% (as of 09/21/2024)	16.34M (as of 09/21/2024)
Asset Entities Inc.	NASDAQ: ASST	Communication services and technology	-53.75% (as of 09/21/2024)	4.87M (as of 09/21/2024)
Genius Group Limited	NYSE: GNS	Education and training	-88.34% (as of 09/21/2024)	16.75M (as of 09/21/2024)
Serve Robotics Inc.	NASDAQ: SERV	Robotics	+57.89% (as of 09/21/2024)	316.28M (as of 09/21/2024)
Novavax Inc.	NASDAQ: NVAX	Biotechnology	+168.21% (as of 09/21/2024)	2.07B (as of 09/21/2024)
Richtech Robotics Inc.	NASDAQ: RR	Robotics	-87.44% (as of 09/21/2024)	69.50M (as of 09/21/2024)

BranchOut Food (NASDAQ: BOF)

BranchOut Food is an international food-tech company that makes plant-based, dehydrated snacks and superfood powders. Founded in 2018 in Bend, Oregon, the company now has production facilities in Peru and Chile too.

After the company announced its revenue had increased by 640% in the first half of 2024, the BOF stock price spiked from $0.67 on Aug. 27 to $3.56 on Sept. 3. Company officials also estimated that revenue would double in the second half of the year, partly fueled by the October opening of a new production facility in Peru.

One analyst liked BOF because it reportedly has under 10 million shares available for the public to buy and sell. This relates to the stock’s float and can indicate bigger price increases alongside higher demand.

Asset Entities Inc. (NASDAQ: ASST)

The multimedia and technology company Asset Entities, Inc. saw its stock spike by 260% near the end of August 2024. Founded in 2020, this Dallas-based company provides social media marketing, content, and services on platforms like Discord, YouTube, and TikTok.

Within the past year, the ASST stock price has fluctuated between a high of $5.10 and a low of $0.87. Despite its volatility, analysts like this Robinhood penny stock because of its low float with about 2.5 million shares available to buy and sell. As of Sept. 21, 2024, ASST traded at about $1.48 per share.

Genius Group Limited (NYSE: GNS)

Genius Group Limited is a global education technology company based in Singapore. Its focus is on artificial intelligence (AI) learning, and it offers services to schools, governments, entrepreneurs, and other groups across many countries. This makes it a popular penny stock in the educational technology industry, according to analysts.

Over the last year, the company’s stock price reached as high as $12 per share and went as low as $0.6585. It may be a good time to buy GNS stock because its value is below $1 per share as of Sept. 21, 2024. This makes it a good pick if you want to invest without much money.

Serve Robotics Inc. (NASDAQ: SERV)

Founded in 2017, Serve Robotics Inc. is a California-based company that designs and develops AI-powered, low-emission sidewalk delivery robots. In 2022, Fast Company listed it as one of 15 tech startups to watch. A year later, the company teamed up with Uber Eats to deploy about 2,000 delivery robots across the U.S.

In the few weeks following July 19, 2024, SERV’s stock jumped by 810% after the semiconductor company NVIDIA Corporation reportedly bought shares in the company. The stock price has come down since then and sits at $7.50 per share as of Sept. 21. Within the past year, SERV’s highest share price was $37, and the lowest was $1.77 per share.

Novavax (NASDAQ: NVAX)

Novavax has been hot this year. Started in 1987, the Maryland-based biotechnology company created the only protein-based COVID-19 vaccine available in the U.S.

In early June 2024, NVAX shares had spiked by about 335% compared to their early January price. In late August, the latest Novavax COVID-19 vaccine received Emergency Use Authorization (EUA) from the FDA. With flu season around the corner, analysts believe the demand will help increase the company’s share price.

NVAX share prices over this year have fluctuated between $3.53 on the low end and $23.86 on the high end. Although the stock currently trades above the usual $5 cutoff for penny stocks, it still gets the attention of penny stock analysts due to its history of volatility and potential for higher demand.

Richtech Robotics Inc. (NASDAQ: RR)

Richtech Robotics Inc. is another company that makes robots used in restaurants, hotels, senior living homes, casinos, factories, and retail centers. Founded in 2016, this Las Vegas-based company now has over 1,000 clients in the U.S. along with partnerships around the world.

On Aug. 16, 2024, Richtech Robotics posted a teaser on the X platform (formerly known as Twitter) about a new robot it’s releasing, and this helped spike its share price. However, the announcement of a $21 million offering on Aug. 29 might negatively impact its shares. Year-to-date prices have fluctuated widely between a low of $0.3022 and a high of $12.29.

What are penny stocks?

Penny stocks are those that typically trade at a very low price. While they were once defined as shares that traded below $1, now shares that trade for under $5 are considered penny stocks. Additionally, some analysts will include stocks with somewhat higher trading prices, especially if they have a recent history of penny stock price levels.

Penny stocks are often offered by smaller startup companies that sell the shares to bring in funds for the company’s growth. Many penny stocks available aren’t traded on major stock exchanges like Nasdaq or the NYSE because they don’t meet the minimum thresholds for their stock price, trading volume, or market capitalization. Instead, they’re traded on OTC markets with fewer regulations and lower listing costs. This lack of oversight makes them riskier and more volatile for investors.

Another common feature of penny stocks is their low liquidity. With a small number of shares being traded in the market, buying or selling a penny stock can significantly impact its price. Therefore, it can be difficult to determine a penny stock’s fair value. It also increases the risk of price manipulation — like pump-and-dump schemes where an investor buys a bunch of stock, inflates the value, and then dumps it — which drops the price and makes it more difficult for other investors to sell.

Important considerations for investors

The combination of a low cost of entry and high potential for gains especially makes penny stocks attractive to retail investors who may have little to invest. However, these stocks come with risks and drawbacks that you need to consider, including:

Volatility: Penny stock prices can fluctuate drastically within a short period of time, so your return can be very unpredictable. While this can sometimes mean attractive gains, it could also lead to big losses.
Lack of transparency: Penny stocks traded on OTC markets aren’t required to disclose the same amount of information as those on major stock exchanges. This makes it more difficult to evaluate the financial health of the company issuing the stock.
Low liquidity: It can be hard to find buyers and sellers, which may negatively impact the price. It can also become a problem if you want to quickly sell the stock to avoid further losses.
Risk of fraud: Penny stocks are often targets of schemes where misleading information helps inflate stock prices before scammers sell their shares and other investors lose their money. Recently, scammers have even sent text messages or used social media to promote purchasing questionable stocks at very low prices.

How to invest in penny stocks on Robinhood

Investing in penny stocks on Robinhood might reduce some of the risks typically associated with these stocks because only those listed on major exchanges like Nasdaq and NYSE are available on the platform. Since the trading platform doesn’t support select OTC markets, where many of the riskier penny stocks are traded, this might shield you from some of the high volatility and lack of regulation typical of those markets.

Robinhood doesn’t curate a list of its best penny stocks to invest in, so you’ll have to search for them on your own. Here’s how you can make your own curated list.

After logging in to Robinhood, select the search bar at the top to see a list of options under “Stock Screeners.”
Select Custom Screener.
Once the custom screener is created, use the filters to change the Share Price option to “Under $5” (or “Under $1” if you want to focus on the really cheap stocks).
You can then save the custom screener under the name “Penny Stocks” to refer to in the future.

While playing around with Robinhood screeners, I discovered that you can also pair down any of Robinhood’s built-in screeners, like “Analyst Picks,” and filter them down to penny stocks by changing the “Share Price” filter to “Under $5.”

FAQs

Are penny stocks worth it?

Depending on your risk tolerance and financial goals, investing in penny stocks may be worth it, but it may not. Despite their attractive low prices and potential for gains, penny stocks are a riskier investment than other stocks, especially if you pick those on the OTC market. The good thing about investing in penny stocks with Robinhood is that the platform only offers penny stocks on major stock exchanges like Nasdaq or the NYSE.

You should be careful when investing in penny stocks because they are often prone to price manipulation or scams, such as “pump and dump” schemes. Thoroughly research the information available about the company’s stock and beware of people who push questionable stocks with unrealistic return potential.

Can penny stocks go to zero?

Yes, penny stocks can drop to zero, so you could lose your entire investment and have a common investing fear become a reality.

This can happen for several reasons, such as a company experiencing sustained losses in revenue, the stock being overvalued on the market, or issues happening like scandals or leadership shakeups at the issuing company. Poor financial performance or negative market sentiment can drive the stock’s value down to nothing, especially if the company has a weak foundation or unstable management.

Can you get rich off penny stocks?

While it’s possible to make money by investing in penny stocks, it’s extremely unlikely to become rich. Penny stocks are volatile, high-risk investments that may offer the potential for significant gains but also carry the possibility of losing all the cash you put into them.

Investors who chase large profits in penny stocks are more likely to fall victim to scams or invest in companies that fail rather than hit the jackpot. The best way to invest wisely is to diversify your portfolio so you’re less likely to lose a significant amount of money if a stock is down.

Bottom line

Investing in penny stocks isn’t a reliable way to get rich quickly or build wealth. These stocks carry significant risk, and if the company fails, you could lose your entire investment. To succeed, you need a deep understanding of market trends, a strong tolerance for risk, and the ability to thoroughly research potential investments.

Although some of the best penny stocks on Robinhood may offer promising opportunities, the penny stock market is highly volatile, and conditions can change rapidly. Therefore, while gains are possible, caution and strategy are essential when venturing into penny stocks.

Always do your research before investing. You might also want to check out our Robinhood review if you’re new to the trading platform.