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: Amyris Inc. (NASDAQ: AMRS)
Today’s penny stock pick is the synthetic biotechnology and renewable chemical company, Amyris Inc. (NASDAQ: AMRS).
Amyris Inc. operates in the clean health and beauty markets through its consumer brands and as a supplier of sustainable and natural ingredients in Europe, the United States, Asia, Brazil, and internationally. It manufactures and sells products for the health and wellness, clean beauty, and flavor and fragrance markets. The company operates under the Amyris, Biofene, Biossance, Pipette, Purecane, and No Compromise trademarks. Amyris, Inc. has a collaboration agreement with the Infectious Disease Research Institute to advance a novel ribonucleic acid vaccine platform, including accelerating the development of a COVID-19 vaccine.
Website: www.amyris.com
Latest 10-k report: https://sec.report/Document/0001365916-21-000007/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for AMRS in the last 3 months, the stock has an average price target of $22.50, which is nearly 397% upside from current levels.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s COO, Eduardo said that the new plant will be in production soon.
- Corporate Insiders Bought Shares Worth $99.4K in the Last 3 Months.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
AMRS – Daily Chart
#2 Bullish RSI: The RSI is near 50 after moving higher from oversold levels, indicating possible bullishness.
#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 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
AMRS – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels, indicating possible bullishness.
#6 Oversold RSI: The RSI is currently moving higher from oversold levels, indicating that the stock could have a bullish move soon.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for AMRS is above the price of $5.05.
Target Prices: Our first target is $7.00. If it closes above that level, the second target price is $9.00.
Stop Loss: To limit risk, place a stop loss below $4.00. Note that the stop loss is on a closing basis.
Our target potential upside is 39% to 78%.
For a risk of $1.05, our first target reward is $1.95, and the second target reward is $3.95. 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 operating losses since its inception. As of December 31, 2020, AMRS had negative working capital of $16.5 million and an accumulated deficit of $2.1 billion.
AMRS – Consolidated Statements of Operations
- Hedge Funds Decreased Holdings by 1.4M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid millions in compensation.
AMRS – Executive Compensation
- The company has ongoing legal proceedings.
- On April 3, 2019, a securities class action complaint was filed against Amyris and CEO, John G. Melo, and former CFO (and current Chief Business Officer), Kathleen Valiasek, in the U.S. District Court for the Northern District of California, alleging securities law violations based on statements and omissions made by the Company during March 2018-March 2019.
- On September 10, 2020, LAVVAN, Inc. filed a suit against the Company in the United States District Court for the Southern District of New York alleging breach of contract, patent infringement, and trade secret misappropriation in connection with that certain Research, Collaboration and License Agreement between Lavvan and Amyris, dated March 18, 2019, as amended.
- Over 50% of AMRS’s capital stock was beneficially owned by five significant stockholders, Foris Ventures, LLC, FMR LLC, DSM, Vivo Capital LLC, and Farallon Capital. These stockholders have the capability to control or influence AMRS’s management, operations, and affairs, as well as matters requiring stockholder approval, including the approval of significant corporate transactions, all of which may not be in the best interest of stockholders.
- The company has substantial debt. As of December 31, 2020, the principal amounts due under AMRS’s debt instruments totaled $170.5 million, of which $56.5 million is classified as current.
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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