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: Clear Channel Outdoor Holdings Inc. (NYSE: CCO)
Today’s penny stock pick is the out-of-home advertising company, Clear Channel Outdoor Holdings Inc. (NYSE: CCO).
Clear Channel Outdoor Holdings Inc. owns, operates, and sells advertising displays in the United States and internationally. The company is comprised of two business divisions – Clear Channel Outdoor Americas, which covers the U.S. and Caribbean markets, and Clear Channel International, which covers markets in Europe, Latin America, and Asia.
The company offers advertising services through billboards, including bulletins and posters; transit displays, which are advertising surfaces on various types of vehicles or within transit systems; street furniture displays, such as advertising surfaces on bus shelters, information kiosks, freestanding units, and other public structures; spectaculars, which are customized display structures that incorporate videos, multidimensional lettering, and figures, mechanical devices and moving parts, and other embellishments; wallscape, a display that drapes over or is suspended from the sides of buildings or other structures; and retail and other small displays. It also provides street furniture equipment, cleaning and maintenance services, and production and creative services; and a public bicycle rental program, which offers bicycles for rent to the general public in various municipalities. The company serves retail, food/food products, entertainment, and telecommunications.
Website: www.clearchanneloutdoor.com
Latest 10-k report: https://sec.report/Document/0001334978-21-000007/
Analyst Consensus: As per TipRanks analytics, CCO has an average price target of $4.13 based on 4 Wall Street analysts offering 12-month price targets for the company.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently raised its fourth-quarter guidance, calling for revenue of $730 million to $750 million, up from a previous range of $715 million to $740 million.
- CCO announced that it was considering selling its European business.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out a symmetrical triangle pattern, which is marked as orange color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
CCO – Daily Chart
#2 Price Above MAs: The stock is trading above its 50-day as well as 200-day SMA, indicating that the bulls are slowly gaining control.
#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 ADX and DI: The ADX indicator shows bullishness as the +DI and ADX lines are above the -DI line.
#5 Bullish RSI: The RSI is currently above 50. This is a possible bullish sign.
#6 Uptrend Channel: The weekly chart shows that the stock is currently trading within an upward-sloping trend channel. These are marked as purple color lines. This is a possible bullish sign. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are in control.
CCO – Weekly Chart
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the signal line, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CCO is if it closes above the near-term resistance level of $3.65.
Target Prices: Our target prices are $4.80 and $6.00.
Stop Loss: To limit risk, place a stop loss below $3.00. Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 64%.
For a risk of $0.65, our first target reward is $1.15, and the second target reward is $2.35. 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:
- Hedge Funds Decreased Holdings by 997.1K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has a history of name changes. It was formerly known as Foster & Kleiser (F&K) (1901–1986), Patrick Media Outdoor (1986–1995), and Eller Media Company (1959–1997). Eller Media Company and changed its name to Clear Channel Outdoor Holdings, Inc. in August 2005. Clear Channel Outdoor was spun off from parent Clear Channel Communications (now iHeartMedia (IHRT)) in 2019.
- Corporate Insiders Sold Shares Worth $203.9K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company has nearly $5.7 billion in debt.
- On August 4, 2020, CCO received written notification from the New York Stock Exchange that the company was not in compliance with an NYSE continued listing standard in Rule 802.01C of the NYSE Listed Company Manual because the average closing price of the company’s common stock fell below $1.00 over a period of 30 consecutive trading days.
- The recent privacy laws (cookies ban) and the rollout of Apple’s new privacy settings are upending the rules of digital advertising on the iOS platform.
- The company has ongoing legal proceedings. Two former employees of Clear Media, a former subsidiary of the Company were convicted in China of certain crimes, including the crime of misappropriation of funds, and sentenced to imprisonment. During the three months ended June 30, 2018, the Company identified misstatements associated with VAT obligations in its business in Italy, which resulted in an understatement of its VAT obligation.
- CCO’s net loss doubled year-over-year, while consolidated revenue decreased $829.2 million, or 30.9%, during 2020 compared to 2019.
CCO – Net Loss
- Despite reporting losses year-over-year, the company executives are drawing significant compensation.
CCO – Executive Compensation
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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