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: Globalstar, Inc. (NYSE: GSAT)
Today’s penny stock pick is the provider of mobile satellite telecommunications services, Globalstar, Inc. (NYSE: GSAT).
Globalstar, Inc. is a telecommunications company that derives revenue from the provision of mobile satellite services. Mobile satellite services are typically used by customers where existing terrestrial wireline and wireless communications networks are impaired or do not exist. The company provides communications services such as two-way voice and data transmission. In addition, one-way data transmission is also offered. Both services are offered using mobile or fixed devices. The company is an owner of satellite assets.
Latest 10-k report: https://sec.report/Document/0001366868-21-000016/
Analyst Consensus: As per TipRanks analytics, GSAT has a high forecast of $3.25, which is a 25% upside from the current price of $2.60. However, the company’s average price target is $1.90 (26.92% Downside) based on two Wall Street analysts offering 12-month price targets in the last 3 months.
Potential Catalysts / Reasons for the Hype:
- The talk of potential satellite capabilities in the next iPhones. Reliable four stars analyst Ming-Chi Kuo of TF International Securities had reported about iPhone 13 using satellite connectivity so that users can make calls and texts in areas without cellular coverage.
- Qualcomm’s (NASDAQ: QCOM) inclusion of Globalstar’s band n53 in its new 5G X65 modem.
- Rumors that someone just invested 37 Million in GSAT.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX lines are above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above the 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Downtrend Broken: The weekly chart shows that the stock had broken out of a downtrend and is currently moving higher. The downtrend line has been marked in pink color. This is a possible bullish indication.
#7 Bullish Stoch: In the weekly chart, the %K line is above the %D line of the stochastic, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GSAT is above yesterday’s close, which translates to a price of $2.65.
Target Prices: Our target prices are $3.50 and $4.50.
Stop Loss: To limit risk, place a stop loss below $2.20. Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 70%.
For a risk of $0.45, our first target reward is $0.85, and the second target reward is $1.85. 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 is a loss-making company. The company had reported a net loss of $109.6 million for the Year Ended December 31, 2020.
- The only way Globalstar’s loss status could change rapidly is commercialization of its n53 spectrum in the U.S. and other countries through presence in the iPhone ecosystem. However, although Globalstar did get an experimental mobile radio station license for its S-band frequency, which is used as downlink in its Low Earth Orbit (LEO) constellation, any connection to Apple remains speculation and also doesn’t explain how an iPhone emergency transmission system would work. Moreover, Apple might decide to link up with another satcom player entirely — perhaps even an upstart like AST SpaceMobile, which is staking its entire future on its ability to build a cellphones-to-satellites network from scratch.
- There are several satellite operators and service providers like Iridium (IRDM) and Orbcomm (ORBC). There are also other companies are involved in space technology like DISH Networks (DISH) and AT&T (T).
- The company had to cut prices of it satellite phones and communication gadgets and had to make its “competitively-priced service plans lower than historic rates” due to competition from Garmin’s (GRMN) InReach, Iridium Go, and the Thuraya X5-Touch, which is a dual-SIM Android smartphone.
- In 2012, the company was delisted from NASDAQ due to the Company’s common stock trading below the minimum bid price of $1.00 in excess of the period permitted by NASDAQ listing rules.
- Despite reporting losses, the compensation for company executives increased year-over-year.
- The bottomline is that Apple’s upcoming California Streaming event tomorrow may shed more light on the tie-up with GSAT. In case the rumors end up being false, there could be a massive decline in the GSAT price. On the flip side, any positive news could cause the stock to catapult to higher prices. This seems to be a high-risk-high-reward venture.
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!
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.