Top Tech Penny Stocks Under $5 to Watch in Q2 2023: Best Value, Growth & Performance Picks

Leading the pack in tech penny stocks priced at $5 or less are Rackspace Technology Inc. for best value, Grab Holdings Inc. for fastest growth, and DiDi Global Inc. for strongest performance.

These companies have outshined their peers in value, growth, and overall returns over the past year. Despite a sector-wide slowdown causing many tech penny stocks to decline, the Invesco S&P SmallCap Information Technology ETF (PSCT) dropped only 2%, and the broader Russell 1000 Index fell 8%.

Below, we break down the top tech penny stocks in three key categories as of April 6, 2023: best value, fastest growth, and best performance.

Best Value Tech Penny Stocks

These stocks demonstrate the lowest price-to-sales (P/S) ratios over the trailing 12 months, offering a glimpse into undervalued opportunities. A lower P/S ratio suggests you pay less for each dollar of sales, indicating potential for future profitability as companies grow.

• Rackspace Technology Inc.: Specializing in multi-cloud computing solutions, Rackspace helps businesses manage applications and data securely. In 2022, Rackspace generated $3.1 billion in revenue, a 4% year-over-year increase fueled by new customers and rising client spending. Despite this, disappointing earnings caused its stock to decline over the past year.
• Conduent Inc.: Providing HR and business services to industrial, transportation, and government sectors, including over 500 government entities, Conduent faced a 6% revenue drop in Q4 2022 amid inflation and rising interest rates. Its stock neared a three-year low in March.
• Compass Inc.: This real estate technology firm operates an online platform for buying, selling, and renting properties. Compass shares fell by more than 50% over the last year due to missed earnings targets and weak forecasts.

Fastest-Growing Tech Penny Stocks

These companies posted the highest year-over-year sales growth in the latest quarter, highlighting startups expanding rapidly even if not yet profitable. Sales growth can reveal momentum, but investors should watch for sustainable profitability plans.

• Grab Holdings Inc.: Based in Singapore, Grab offers a "superapp" across Southeast Asia with services spanning delivery, finance, business, and mobility. In 2022, Grab’s revenue soared 112% year-over-year to approximately $1.4 billion, driven by strong Mobility and Delivery segments.
• Stem Inc.: A clean energy technology firm, Stem operates an AI-driven platform managing solar assets, EV fleet charging, and more. Its revenue nearly tripled in Q4 2022 thanks to hardware sales from strategic partnerships.
• Velo3D Inc.: Specializing in metal 3D printing technology, Velo3D offers software, printers, and quality control services. The company reported $29.8 million in revenue for Q4 2022, nearly tripling from the prior year quarter due to increased system sales and higher average prices.

Tech Penny Stocks With Best Performance

These stocks experienced the smallest total return declines over the past 12 months among their peers.

• DiDi Global Inc.: This Chinese ride-sharing giant operates across Asia, Latin America, Europe, and Africa, also providing food delivery, freight, and financial services. Recent easing of Chinese government restrictions helped DiDi’s shares rebound, though they remain well below previous highs.
• Nokia Oyj: The Finnish technology and communications company provides mobile phones, network infrastructure, and software. Nokia benefits from strong 5G network demand despite missing profit expectations.
• Real Matters Inc.: A Canadian firm offering real estate software solutions, Real Matters supports property valuation, risk management, and data analytics for lenders and appraisers across North America.

Advantages of Investing in Tech Penny Stocks

Tech penny stocks offer exciting growth potential thanks to their small market caps and innovative products. Investors can start with modest capital, buying thousands of shares at low prices, which allows for significant percentage gains if the stock appreciates. For example, investing $200 in a 5-cent stock yields 4,000 shares; a doubling in price results in a 100% return, a feat harder to achieve with larger-cap stocks like Apple with higher per-share prices.

Risks to Consider with Tech Penny Stocks

Many tech penny stocks trade over-the-counter (OTC), exposing investors to less regulation and higher risks. OTC listings often have fewer disclosure requirements, making it challenging to access reliable financial data. Investors must perform thorough due diligence to avoid scams.

Additionally, these stocks usually have low liquidity, meaning fewer buyers and sellers. This can lead to difficulties entering or exiting positions, wider bid-ask spreads increasing trading costs, and vulnerability to price manipulation causing sudden volatility.

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