Please ensure Javascript is enabled for purposes of website accessibility

The Only 2 Robinhood Stocks Under $5 I'd Even Consider Buying Right Now

By Keith Speights - Updated May 20, 2021 at 2:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's not because of their low share prices.

The list of companies you can buy for $5 is undoubtedly shorter today than it was 10 years ago. However, there are always plenty of stocks that trade at such low prices.

Robinhood investors seem to especially like cheap stocks. Of the 100 most widely held stocks on the trading platform, 14 of them have share prices below $5. While these stocks are popular among Robinhood investors, I wouldn't touch many of them with a 10-foot pole. There are only two Robinhood stocks under $5 I'd even consider buying right now.

Young man sitting behind a desk and smiling while looking at his phone

Image source: Getty Images.

A process of elimination

I'm at least somewhat familiar with over half of the stocks with share prices below $5 that currently rank in the Robinhood top 100. Two of them are Canadian marijuana stocks that face declining sales and a tough market environment -- OrganiGram and Sundial Growers. I think that OrganiGram is worth watching, but the headwinds for both companies make it relatively easy for me to check them off the list.

Other cheap Robinhood stocks that I'm familiar with are unattractive for various reasons. For example, Zomedica's Truforma diagnostic platform for animals is promising, but it's way too early to know if it will be the commercial success the company hopes it will be.

There are also several of the cheap Robinhood stocks that I don't know much about. Maybe I'm being too hasty in eliminating them from consideration, but there's some wisdom to investing legend Peter Lynch's advice to invest in what you know.

So which two stocks would I consider buying? Senseonics Holdings (SENS 7.52%) and Tonix Pharmaceuticals (TNXP 2.83%).

Why Senseonics and Tonix stand out

Senseonics and Tonix catch my eye for two main reasons. First, both companies have products that could be big winners over the long run. Second, their valuations aren't ridiculous in light of their prospects.

Nearly 1.6 million Americans have type 1 diabetes, which requires close monitoring of their glucose levels. Senseonics' Eversense is an implantable continuous glucose monitoring (CGM) system that can be used for 90 days. The company is awaiting U.S. approval for a 180-day sensor. Leading diabetes-care company Ascensia Diabetes Care (ADC) co-markets Eversense with Senseonics. 

Senseonics only expects to generate around $15 million in sales this year. However, it anticipates revenue of between $150 million and $200 million by 2025. The company's market cap currently stands around $900 million. I think it's possible that increased adoption of Eversense could make Senseonics a long-term winner.

Tonic doesn't have a product on the market yet. However, the drugmaker expects to report results from a late-stage study of TNX-102 SL in treating fibromyalgia later this year. This could set the stage for a potential regulatory filing in 2022. The chances of success with this late-stage study appear to be pretty good, considering that Tonix has already announced positive results from another phase 3 study of TNX-102 SL.

The drugmaker's pipeline also includes other intriguing programs. Tonix hopes to advance a couple of programs into phase 2 testing this year -- TNX-601 CR in treating major depressive disorder and TNX-1300 in treating cocaine intoxication. It also anticipates the initiation of a phase 1 study of COVID-19 vaccine candidate TNX-1800 in the first half of 2022. While this vaccine is a latecomer, it might be able to provide long-lasting protection against coronavirus infection with a single shot.

Tonix's market cap of around $327 million makes it the smallest company on the Robinhood top 100 list. I suspect that positive results for the company's late-stage study of TNX-102 SL or any of its other pipeline candidates would provide tremendous catalysts for this clinical-stage biotech stock.

My waffle word

Note that I only said that Senseonics and Tonix are the only two Robinhood stocks trading at under $5 per share that I'd consider buying right now. My use of the waffle word "consider" was intentional.

Both Senseonics and Tonix are risky. There's no guarantee that Eversense will achieve the sales that Senseonics and ADC expect. Tonix's experimental drugs and vaccines could flop in clinical testing.

Because the two companies are unprofitable, they also must frequently look at alternatives for raising more cash. This is especially the case for Tonix since it isn't generating revenue and its research and development costs are increasing.

I'm not at a point where I'm ready to buy either of these cheap Robinhood stocks. However, if they deliver on their potential, Senseonics and Tonix might not be so cheap in the future.

Editor's note: We have removed the mention of Rolls-Royce from this article because the writer referred to the wrong company. The publicly traded Rolls-Royce Holdings is an industrial technology company.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Senseonics Holdings, Inc. Stock Quote
Senseonics Holdings, Inc.
$2.21 (7.52%) $0.15
Rolls-Royce Holdings plc Stock Quote
Rolls-Royce Holdings plc
$1.07 (-0.65%) $0.01
OrganiGram Holdings Stock Quote
OrganiGram Holdings
$1.14 (0.86%) $0.01
SNDL Inc. Stock Quote
$2.87 (0.69%) $0.02
Tonix Pharmaceuticals Holding Corp. Stock Quote
Tonix Pharmaceuticals Holding Corp.
$1.45 (2.83%) $0.04
Zomedica Pharmaceuticals Corp. Stock Quote
Zomedica Pharmaceuticals Corp.
$0.37 (-3.01%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.