We recently started a series called “Penny Stock of the Day”. These ideas are geared for traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Pieris Pharmaceuticals Inc. (NASDAQ: PIRS).
Pieris Pharmaceuticals discovers and develops anticalin protein-based drugs in the United States. The company develops anticalin proteins that are low molecular-weight therapeutic proteins derived from lipocalins.
PIRS’s lead respiratory Anticalin-based drug candidate includes PRS-060/AZD1402; and lead immune-oncology program comprises Cinrebafusp alfa. The company also develops PRS-344, a bispecific anticalin-antibody fusion protein targeting 4-1BB and PD-L1 for immuno-oncology diseases; and PRS-352, a preclinical-stage program addressing undisclosed targets for immuno-oncology diseases.
The company has a license and collaboration agreement with Les Laboratoires Servier and Institut de Recherches Internationales Servier, AstraZeneca AB, and Seagen Inc.; and license agreements with Technical University of Munich, Enumeral Biomedical Holdings, Inc., and Sichuan Kelun-Biotech Biopharmaceutical Co. Ltd. The company also has a clinical trial collaboration and supply agreement with Eli Lilly and Company.
Website: www.pieris.com
Latest 10-k report: https://sec.report/Document/0001583648-21-000005/
Analyst Consensus: According to TipRanks analytics, based on 2 analysts giving stock ratings to PIRS in the past 3 months, the stock’s average price target is $9.00, which is an 80.36% Upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The rumors about potential buyouts by Swiss drug giants like Roche, Genentech.
- Analysts reiterating the buy rating for the stock.
Recent Analyst Ratings | Source: TipRanks.com
- The news of the presentation of preclinical data for PRS-220, a connective tissue growth factor (CTGF) inhibitor the Company is developing for the treatment of idiopathic pulmonary fibrosis (IPF) via oral inhaled administration, at the European Respiratory Society (ERS) International Congress 2021.
- The company’s pipeline of drugs that are developed in partnership with other companies. PRS-060 treatment in combination with AZD1402 from AstraZeneca is being developed for treating moderate-to-severe asthma. The company is also collaborating with Servier with its PRS-344/S095012 combination treatment for HER2-expressing cancers. A phase 1 trial will commence on this later this year.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Ascending Triangle Pattern: The daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. Once the stock breaks out of the ascending triangle pattern with high volume, it usually moves higher. The breakout level of the ascending triangle pattern also acts as a good support level.
PIRS – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line are above the -DI line, and the ADX line has currently moved higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls are currently in control.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend line. This line is shown in pink color in the chart below. The stock is also trading above its 50-week as well as 200-week SMA. All these are possible bullish signs.
PIRS – Weekly Chart
#6 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for PIRS is above the price of $5.10.
Target Prices: Our first target price is $6.50. If it closes above that level, the second target price is $8.00.
Stop Loss: To limit risk, place a stop loss at $4.30. Note that the stop loss is on a closing basis.
Our target potential upside is 28% to 57%.
For a risk of $0.80, our first target reward is $1.40, and the second target reward is $2.90. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has incurred significant net losses. For the years ended December 31, 2020, and 2019, PIRS reported net losses of $37.2 million, and $25.5 million, respectively. As of December 31, 2020, the company had an accumulated deficit of $211.4 million.
PIRS – Annual Report – Net Loss
- Despite being a loss-making company, the company executives are being paid significant compensation.
PIRS – Executive Compensation
- Pieris’ science is unproven, as the company doesn’t have a drug in phase 3 trials yet, and is still waiting on positive phase 2 data. The data on whether the company’s drugs actually work will be available only by next year. In case this does not meet the expectations, the stock price could have a significant decline.
- Currently, AstraZeneca has rights to the company’s asthma drug, which is the company’s lead molecule.
- The company’s QoQ losses tripled, from $5 million in June 2020 to $15 million in June 2021.
PIRS – Q2 Report – Net Loss
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
— Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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