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: ZIOPHARM Oncology Inc. (NASDAQ: ZIOP)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, ZIOPHARM Oncology Inc. (NASDAQ: ZIOP).
ZIOPHARM Oncology, Inc. focuses on discovering, acquiring, developing, and commercializing a portfolio of immuno-oncology therapies to treat patients with cancer.
The company develops Sleeping Beauty platform, which is based on the non-viral genetic engineering of immune cells using a transposon/transposase system to engineer T-cells outside of the body for infusion; and Controlled IL-12 to stimulate expression of interleukin 12 or IL-12, a master regular of the immune system, in a controlled manner to focus the patient’s immune system to attack cancer cells.
Its product candidates include T cell receptor + T therapies to target solid tumors; chimeric antigen receptor + T cell therapies targeting CD19 for hematologic malignancies; and Ad-RTS-hIL-12 plus veledimex, a gene delivery system to regulate the production of IL-12 to treat patients with recurrent glioblastoma multiforme in adults.
The company has a license agreement with PGEN Therapeutics, Inc.; a research and development agreement with The University of Texas MD Anderson Cancer Center; a patent license agreement with the National Cancer Institute; and a cooperative research and development agreement with the National Cancer Institute.
Website: www.ziopharm.com
Latest 10-k report: https://sec.report/Document/0001193125-21-063387/
Analyst Consensus: According to TipRanks analytics, ZIOP has an average rating of Moderate Buy, based on three Wall Street analysts offering ratings in the last 3 months. The average price target for the stock is $3.25, which is a 68.39% Upside from current levels.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The appointment of Kevin S. Boyle in the capacity of the new Chief Executive Officer resulting in a new wave of optimism among investors with regards to Ziopharm.
- The news of insiders buying the stock. The Form 4 filings showed that a few board members acquired a significant number of shares in the company. Corporate Insiders had bought Shares Worth $434.1K in the Last 3 Months as per TipRanks.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel with historic high volumes, which are shown as purple color lines. This is a possible bullish indication.
ZIOP – 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 started to move higher from below the +DI and -DI lines.
#3 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.
#4 Bullish Aroon: The chart shows that the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
ZIOP – Weekly Chart
#6 Above Support Area: The weekly chart shows that the stock is moving higher after taking support near a long-term support area. This is marked as a pink color dotted line. An upmove from this area looks like a bullish sign.
#7 Bullish Stoch: The weekly chart also shows that the %K line of the stochastic is currently above the %D line, and is also moving higher from oversold levels. This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ZIOP is above the price of $2.25. This is marked as a green color dotted line in the daily chart.
Target Prices: Our first target price is $3.50. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $1.55. Note that the stop loss is on a closing basis.
Our target potential upside is 56% to 144%.
For a risk of $0.70, our first target reward is $1.25, and the second target reward is $3.25. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- The company has not generated significant revenue and has incurred significant net losses in each year since its inception. For the year ended December 31, 2020, ZIOP had a net loss of nearly $80.0 million, and, as of December 31, 2020, the company had incurred approximately $764.1 million of accumulated deficit since inception in 2003.
ZIOP – Annual Report – Net Loss
- The latest 10-Q from the company lays out the need to raise at least $50 million tied to credit line add/extension. At $2 this would result in around 12% dilution.
- The company executives are drawing significant compensation, despite reporting losses year-over-year.
ZIOP – Executive Compensation
- As of February 24, 2020, there were 214,667,023 shares of common stock outstanding and an additional 31,115,329 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.
- The company has substantial competition. Novartis International AG (Kymriah®), Kite Pharma Inc./Gilead Sciences, Inc. (Yescarta®) and Bristol-Myers Squibb Company (Breyanzi®), have now commercialized autologous CAR+ T cells against CD19, while TCR program faces competition from several companies, including from Adaptimmune Therapeutics plc in collaboration with GlaxoSmithKline plc, ArsenalBio, Lyell, bluebird bio, Kite Pharma Inc./Gilead Sciences, Inc., Achilles Therapeutics Limited, Iovance Biotherapeutics, Inc., Immatics Biotechnologies GmbH, Tmunity Therapeutics Inc, Medigene AG, Tactiva Therapeutics, LLC, Takara Bio, Inc., TCR2 Therapeutics Inc., Zelluna Immunotherapy AS, PACT Pharma, Inc. and others. This means that even if the company obtains regulatory approval of potential products, it may not be the first to market and that may affect the price or demand for the company’s potential products.
- ZIOP is heavily dependent on patents, know-how, and proprietary technology that are licensed from others, particularly MD Anderson, Precigen, and the National Cancer Institute, or the NCI, as well as the contributions by MD Anderson under our research and development agreements.
- The bottom-line is that the company has not demonstrated an ability to perform the functions necessary for the successful commercialization of any product candidates, and has a limited operating history upon which to base an investment decision.
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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