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: Akebia Therapeutics Inc. (NASDAQ: AKBA)
Today’s penny stock pick is the biotech company, Akebia Therapeutics Inc. (NASDAQ: AKBA).
Akebia Therapeutics Inc. focuses on the development and commercialization of renal therapeutics for patients with kidney diseases. The company’s lead product investigational product candidate is vadadustat, an oral therapy, which is in Phase III development for the treatment of anemia due to chronic kidney disease (CKD) in dialysis-dependent and non-dialysis dependent adult patients. It also offers Auryxia, a ferric citrate that is used to control the serum phosphorus levels in adult patients with CKD on dialysis; and the treatment of iron deficiency anemia in adult patients with CKD not on dialysis. Akebia Therapeutics, Inc. has collaboration agreements with Otsuka Pharmaceutical Co. Ltd. for the development and commercialization of vadadustat in the United States, the European Union, Russia, China, Australia, Canada, the Middle East, and other countries; and Mitsubishi Tanabe Pharma Corporation for the development and commercialization of vadadustat in Japan and other Asian countries, as well as research and license agreement with Janssen Pharmaceutica NV for the development and commercialization of hypoxia-inducible factor prolyl hydroxylase targeted compounds worldwide.
Website: www.akebia.com
Latest 10-k report: https://sec.report/Document/0001628280-22-004522
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for AKBA in the last 3 months, the stock has an average price target of $7.67, which is nearly 213% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Rumors that vadadustat would receive FDA approval soon.
- Analysts from Needham and H.C. Wainwright reiterated ‘Buy’ rating and increased price targets for the stock.
Analysts | Source: TipRanks.com
- The news that the company granted 12 newly-hired employees options to purchase an aggregate of 97,000 shares of Akebia’s common stock on February 28, 2022, as inducements material to each such employee entering into employment with Akebia. Inducement grants are typically telltale signs for approval.
- Rumors about a buyout.
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.
AKBA – 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 is currently moving higher from below the +DI and -DI lines.
#3 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained 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. This indicates bullishness.
#6 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.
AKBA – Weekly Chart
#7 Bullish RSI: The RSI is near 50 and moving higher, indicating possible bullishness.
#8 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#9 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates 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 AKBA is above the price of $2.80. However, those with a higher risk appetite can purchase half the intended quantity of shares of AKBA above $2.50.
Target Prices: Our first target is $4.00. If it closes above that level, the second target price is $6.60.
Stop Loss: To limit risk, place a stop loss at $2.10. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 136%.
For a risk of $1.10, our first target reward is $1.80, and the second target reward is $3.80. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has incurred net losses each year since its inception, including net losses of $282.8 million for the year ended December 31, 2021. As of December 31, 2021, AKBA had an accumulated deficit of $1.5 billion.
AKBA – Consolidated Statements of Operations and Comprehensive Loss
- Hedge Funds Decreased Holdings by 105.8K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Corporate Insiders Sold Shares Worth $302.3K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company has multiple legal proceedings.
- In July 2011, a third party filed an opposition to our issued European Patent No. 2044005, or the ’005 EP Patent, in the European Patent Office, or the EPO. On February 27, 2018, AKBA had to withdraw the ’005 EP Patent from appeal and file a divisional patent application to pursue a focused claim set that includes claims for vadadustat, as well as pharmaceutical compositions and methods of treating anemia.
- In September 2018, Dr. Reddy’s Laboratories Limited filed an opposition to the company’s issued Indian Patent No. 287720 in the Indian Patent Office.
- The company has an ongoing Shareholder Litigation Relating to the Merger with Keryx and Alpha Therapeutics Merger Sub, Inc. In October and November 2018, four purported shareholders of Keryx filed four separate putative class actions, or the Merger Securities Actions, against Keryx, a former officer and director of Keryx (Jodie P. Morrison), former directors of Keryx (Kevin J. Cameron, Mark J. Enyedy, Steven C. Gilman, Michael T. Heffernan, Daniel P. Regan and Michael Rogers, some of whom are current members of AKBA’s Board of Directors), challenging the disclosures made in connection with the Merger.
- Loper v. Akebia Therapeutics, Inc., et al., or the Loper Action alleges that the registration statement filed in connection with the Merger contained allegedly false and misleading statements or failed to disclose certain allegedly material information in violation of Section 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended.
- Despite being a loss-making company, the executives are being paid millions in compensation.
AKBA – 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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