With investing, it often pays to stick with companies that have a history of profitability and a proven business model. That said, most folks like to take some chances now and again. So, when looking at speculative penny stocks, what should you keep in mind?

It’s preferable to own companies that have demonstrated revenue generation and significant market demand. It’s one thing for a company to promise folks the moon and publish a bunch of press releases. It’s quite another to achieve tangible signs of commercial success as a smaller enterprise.

Investors should also consider the potential upside. Speculative penny stocks are highly risky and could easily trade down to zero if things go unfavorably.

In return for shouldering that risk, a speculative penny stock must offer a strong payoff in a bullish outcome and have a reasonable chance of paying out. These three speculative penny stocks are among the small group of microcap names that offer traders an intriguing outlook at today’s prices.

Terran Orbital (LLAP)

Terran Orbital (NYSE:LLAP) is a space company focused on producing micro-satellites. Shares got off to a bumpy start, with the former SPAC sliding from $10 last year to a low of just $1.29.

But shares doubled earlier in 2023. That’s because Terran won a stunning $2.4 billion new contract with Rivada Space Networks. The contract specifies that Terran will build 288 low-earth satellites for Rivada. This deal was many multiples of Terran’s prior market capitalization, and also a massive increase to the company’s $198 million backlog prior to the Rivada deal.

Canaccord analyst Austin Moeller has a buy on LLAP stock and sees dramatic upside. Moeller bases this view on the premise that small satellite demand will increase roughly sevenfold over the next decade. The Rivada deal, as large as it is now, would seem like small potatoes if the market grows to that degree.

Adding to the excitement, defense industry titan Lockheed Martin (NYSE:LMT) invested $100 million in Terran late last year. Not only does that validate Terran’s technology, but it also served as the basis for a Strategic Cooperation Agreement “SCA” between the two firms, which could lead to more business for Terran in the future as well.

Liberty TripAdvisor (LTRPA)

Liberty TripAdvisor (NASDAQ:LTRPA) is an interesting speculative penny stock. That’s because it has a unique structure. Liberty TripAdvisor is part of famed cable investor John Malone’s Liberty family of companies.

You may know Malone for using aggressive amounts of leverage in his holdings to maximize returns. Unfortunately, this sometimes backfires. LTRPA stock is a case in point. Liberty TripAdvisor is a holding company that owns a sizeable chunk of travel website TripAdvisor (NASDAQ:TRIP).

Prior to the pandemic, this sort of aggressive bullish bet on TripAdvisor’s future probably made sense. With the downturn in global travel demand, however, TripAdvisor’s value sunk, and the leveraged version of that bet, Liberty TripAdvisor, collapsed from $7 a share to less than a dollar today.

Liberty TripAdvisor also had to raise capital at an inopportune time during the crisis which diluted shareholders greatly.

Here’s the thing though. TripAdvisor has started to recover. It is strongly profitable once again, and TRIP shares go for just 16 times forward earnings. And revenues are strongly rebounding as well.

Will it be enough to save LTRPA stock? It remains to be seen. Liberty TripAdvisor currently has a book value of -$1.87 per share, implying a potentially negative net worth if they liquidated the holding company today. However, it has long-term debt that doesn’t mature anytime soon, giving Liberty TripAdvisor time to recover if TRIP shares regain their prior valuation.

Is LTRPA stock going to work out? Only time will tell. But for investors that are confident in a recovery in the global travel market, LTRPA stock could deliver highly levered upside to that theme if things go according to plan.

WM Technology (MAPS)

WM Technology (NASDAQ:MAPS) is a software company focused on the cannabis industry. Its Weedmaps platform offers cannabis retailers a variety of services like ecommerce, compliance and payments.

It also serves as a marketplace, allowing cannabis customers to search the platform and compare and contrast different stores’ catalogs in their area.

Weedmaps initially saw significant success and has grown to an approximately $200 million per year in revenues business. Lately, it has been more challenging for the company.

As cannabis retailers have struggled to make money and face lingering competition from the black market, spending on software solutions in the industry has slowed down. Weedmaps has been rumored to provide some listings to unlicensed operators as well.

Still, the trend continues to be toward more new legalized marijuana markets in various U.S. states, which expands the opportunity for WM. In addition, at some point, consolidation in the industry should lead to more stable profits and thus more capital to invest in WM’s software solutions.

It remains to be seen whether WM can adapt to the more challenging market conditions in the cannabis industry. However, it has already built a strong revenue base, meanwhile the market capitalization has dipped to $115 million. That leaves plenty of room for upside in MAPS stock if and when the company returns to profitability.

On the date of publication, Ian Bezek held a long position in LMT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.